Crowdsource the CFPA!

By Felix Salmon
October 19, 2009
thanks to something known as the Miller-Moore amendment, the Consumer Financial Protection Agency will now be barred from overseeing all but a handful of credit unions and any bank with less than $10 billion in assets. That's 98% of all the banks in the country. Even so, however, it's not exactly suprising to see the headline in The Hill this morning: "Tweaks to consumer agency fail to calm banks, credit unions". Those lobbyists, they're never satisfied. (If they were, they'd be out of a job.)

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The credit unions and the banks have won: thanks to something known as the Miller-Moore amendment, the Consumer Financial Protection Agency will now be barred from overseeing all but a handful of credit unions and any bank with less than $10 billion in assets. That’s 98% of all the banks in the country. Even so, however, it’s not exactly suprising to see the headline in The Hill this morning: “Tweaks to consumer agency fail to calm banks, credit unions”. Those lobbyists, they’re never satisfied. (If they were, they’d be out of a job.)

I’m actually a little unclear on what the Miller-Moore amendment does. Here’s how the NYT explains it:

Under the Miller-Moore amendment, the new agency would have the authority to write rules for all banks and other lenders, including lenders that have never faced significant regulation. But the banks with assets of less than $10 billion and credit unions smaller than $1.5 billion would not face regular exams by the agency.

Instead, the consumer regulations would continue to be enforced in most cases by the agencies that monitor the financial condition of the banks. Mr. Frank said that under the amendment, the new agency would still have the authority to investigate complaints raised at any bank.

So the CFPA can write rules for small banks, and can investigate complaints at small banks, but can’t examine small banks, or enforce its own regulations at small banks? It all seems like a horrible mess to me.

One thing is clear, though: in the wake of the amendment being accepted, consumer finance is crying out for some kind of centralized, crowdsourced database of bank fees and practices. If the CFPA is barred from examining banks itself, then we should just get the banks’ customers to do its job for it. Then violations of CFPA rules could be automatically flagged and forwarded on to the agency as soon as they arise, even without formal examinations.

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