PayThink

The Consumer Financial Protection Bureau has shown interest in the student loan marketplace, noting its potential to cause systemic problems, and the agency wants to assist struggling student borrowers.

The Financial Stability Oversight Council was created as part of the 2010 Dodd-Frank reform law to identify risks and respond to emerging threats to financial stability. The FSOC exercised its authority for the first time last November, when the council issued recommendations to the Securities and Exchange Commission regarding the regulation of money-market mutual funds.

The market should pay more attention to whether banks are adequately capitalized for unabated fraud, such as misrepresentations of securities or insider trading, settlement complications and other operational failures.

The Consumer Financial Protection Bureau is seeking public comment on the most beneficial ways for Congress and regulators to step in and aid distressed student loan borrowers.

Recreating this industry involves regulation that more effectively aligns the interests of lenders and borrowers, consumer education and outreach and market-driven solutions.

An advisory council warned the Consumer Financial Protection Bureau that borrowers are still at risk from small-dollar loans with high fees and roll-over debt.

Banks, already way long on deposits, will end up paying even lower rates as funds flood in if money market mutual funds are forced to use floating net asset values.

Many problems with payday products are concocted by activists and politicians with mercenary intent who are more interested in squelching innovation than letting people make choices for themselves.

If the FSOC fails to get the SEC to adopt new standards, it could look weak. If it succeeds, this mechanism will be used more often. Either way, the intervention is likely to sow division among regulators.

The Consumer Financial Protection Bureau has received its second warning for unclear and inefficient supervision from the U.S. Chamber of Commerce.