WASHINGTON — President Obama proposed a plan last week to create a consumer advocacy agency that would field and investigate consumer complaints brought against banks and credit unions, something currently overseen by NCUA, the Federal Reserve, FDIC and the other existing regulators.
The plan came under immediate scrutiny by credit union lobbyists who insisted that existing federal oversight is adequate. "I'd also like to know who is going to pay for his," said Fred Becker, president of NAFCU.
CUNA President Dan Mica expressed concerns about the proposed Consumer Financial Protection Agency, which he said "would be armed with a very broad mandate." "CUNA needs to take a very close look at the details surrounding this proposal," said Mica in a prepared statement.
The president also proposed a minor consolidation of depository regulators, which would retain NCUA as the regulator for credit unions, apparently as an independent agency.
The plan would eliminate the Office of Thrift Supervision - a federal agency that has had more lives than a cat - and the Office of the Comptroller of the Currency, and wind them into an overall banking regulator, and also get rid of the federal S&L and Industrial Loan Company charters.
Both CUNA and NAFCU stressed they will work to ensure that NCUA remains independent and continues its role as manager and administrator of the National CU Share Insurance Fund as the proposal goes to Congress. "Our primary concern is the independence of NCUA and the Administration's proposal appears to do nothing to affect that," said Ryan Donovan, senior lobbyist for CUNA. The plan will now go to Congress, which has its own regulatory consolidation in mind.
The proposed consumer watchdog is a response to critics who said the failure of the current watchdogs over financial consumer products - Federal Reserve, Federal Trade Commission, FDIC, Office of Thrift Supervision and NCUA - to adequately monitor the sale of subprime and other high-risk mortgage products has led to the current financial crisis.
The idea came from consumer advocate Elizabeth Warren, who has been battling banks and credit unions for years over bankruptcy reform and other issues and is currently chair of the congressional committee overseeing the banking bailouts. The new agency would set standards for consumer disclosures and monitor banks, credit unions, mortgage companies and insurers on how they adhere to the standards.
NCUA Chairman Michael Fryzel expressed support for reform of the regulatory system. "The Administration's proposal merits serious consideration," he said. "Given the market turmoil of the last several months, and the resultant consumer uncertainty regarding the entire financial system, there is now an opportunity for restructuring that will genuinely produce improved regulation."
"At first reading, I am pleased with two specific elements: the creation of a council that would enhance consumer protections, and the maintenance of a separate and independent NCUA. Both of these, in concert with other aspects of reform under consideration, will serve to ultimately improve the safe and sound operations of the U.S. financial system," said Fryzel.
