A tremendous anger has been directed at our industry and institutions, a good portion of it justified by the debacles in the mortgage market and on Wall Street and the general attitude we have espoused the last 10 years.
No one takes the position that regulatory reform is unnecessary — the great debates rage around what areas should be reformed and how much reform should take place. My concern is that, if we as an industry do not become proactive in helping along the reform process, regulations will be written by government bureaucrats, lawyers and professors who have little experience in the trenches.
No one questions the assertion that the credit markets are broken — no one denies that the customers we serve are confused and angry about things they do not understand in the products they use. Yet when the idea of an agency dedicated to consumer protection and simplification is proposed, we rail against it as if this single idea will destroy banking as we know it. Trust me — it will not.
In fact, a Consumer Financial Protection Agency can be the vehicle that restores consumer confidence in our products, our services and our institutions. The customers we serve will always need credit and other banking products, and they won't begrudge their banks' making a fair profit. What they want is simple, clearly explained products and the comfort that someone is looking out for their best interests when financial products are developed and marketed.
In recent days a great deal of discussion has opposed creating a new bureaucracy, another set of examiners, more regulations. Some have opined that consumer protection is adequately provided for by existing agencies and therefore is adequately handled by the present structure.
But in every existing agency, consumer protection is a secondary or tertiary responsibility, after safety and soundness. Consequently, it is often a regulatory afterthought.
If we expect attention to be paid to consumer protection and product simplification these functions must be consolidated into a functional entity with rulemaking and enforcement authority. A Consumer Financial Protection Agency need not be an undue regulatory burden; the examination function could be handled by existing regulators, and the agency responsibilities can be structured to ensure no undue burden on community banks. A CFPA may be new, but the vast majority of its staff and functions will be acquired from the existing regulatory bodies. If it is correctly designed, it will be a vastly more efficient way to protect the interests of retail banking customers and to oversee the credit and lending products offered by nonbank entities.
For a good portion of my banking career, I have been involved with products registered under the supervision of regulators who continually examine, write rules and look for wrongdoing. It has not always been easy, but my experience has taught me that vigilant, well designed regulations and agencies are the best structure for protecting me as a businessman and the consumers I serve.
No one intends that a CFPA substitute for personal responsibility on the part of consumers, and part of its responsibility would be educational. It could be a powerful force to show the American public how to correctly use credit and how to understand the options available from both financial and nonfinancial providers.
It will advocate sensible, simple financial options and help people understand that neither banks nor bankers are the villains in their financial lives.
Since we as an industry agree that regulatory reform is both needed and deserved, let's stop arguing about how to prevent it and help design a system that benefits us as institutions and the customers we support. Rather than seeing a CFPA as an unneeded regulatory burden, let's make sure it serves as an efficient financial product overseer and our educational advocate with the consuming public.