Consumer Protection Agency to Have Major Impact says Bank Executives

As regulators work to implement new consumers protections from the Dodd-Frank Act, the majority (73%) of bank executives are confident that the creation of consumer protection agency will have an impact on their business according to a survey from Grant Thornton.

However, executives are not confident that the financial reform bill will be effective in detecting the broad risks to the financial system and preventing or reducing the threat of future taxpayer-funded bailout.

Nearly half (47%) of bankers believe the reform is not at all effective and an additional 52% feel it is somewhat effective. Only two percent say the reform is effective and no one says that it is “very effective.”


“Many of the rules under the Dodd-Frank Act have yet to be defined by regulators, which may account for the uncertainty and trepidation bankers feel about this legislation,” says Nichole Jordan, partner and sector leader of Grant Thornton’s Banking and Securities practice. “Although some financial institutions are beginning their compliance efforts now, the success of financial reform is something to be measured over the long term.”

Bankers also expressed concerned that interchange fees paid by merchants and retailers to banks that issue debit cards would be set by the Federal Reserve in an amount that is “reasonable and proportional” (71%). Only a small proportion of the bankers were concerned about the Volcker rule (3%) and regulation of derivatives (4%).

The bill provides the Consumer Protection Bureau the authority to enforce rules for financial products, including reverse mortgages.  As part of the law, the agency is required to conduct a reverse mortgage study to determine any deceptive practices and see whether suitability standards are necessary.

It’s also required to determine whether additional safeguards are needed to protect consumers from being sold reverse mortgages to fund inappropriate annuities, investments, and other financial products. To view a copy of the report, see here.

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  • While Lance Jackson seems satisfied that the new consumer protection bureau is in good hands, among bankers I believe that position is in the vast minority. It certainly is among Republicans.

    While there are good parts in the bill, overall it is a huge risk designed by one political party with a very slanted view on financial transactions.

    On derivatives, my view is and most likely will stay in the minority for awhile. I am more concerned about those products than any other addressed in the new law.

    It will be hard for the law to be gutted for at least two years. In between we will get some idea how it is intended to work.

    As to reverse mortgages, will there be any significant changes other than in documents? I expect a 200 plus page application to evolve over the next eighteen months with even more signature requirements. I hope the bureau is serious about clamping down on noncompliant advertising especially in the social media as well as the Internet overall.

    • Good morning Mr. or Mrs. Critic, the Zoro of this blog.

      One of the reasons I posted a positive remark about Elizabeth Warren was because I heard her discussing her plans to reduce mortgage application paperwork and add clarity to the process. Her thinking made a lot of sense to me, but the devil will be in the details.

      I’m hopeful that she takes a common sense approach to other intiatives too, but I’m not aware of her position on most of them.

      As a banker and Republican, I hope she takes a balanced and thoughtful approach.

      • Lance,

        Zorro was a figment of a very imaginative mind. I am afraid I am only too real for most RMD readers.

        Unlike you, I have no trust in what Elizabeth Warren will do. I am no fan of the appointees of either Timothy Franz Geithner or our President. She is a Czar who apparently has a higher position than even the to be named Consumer Protection Bureau Director. Congress never authorized such a position and it is not in her interests to find the Director until she deems she should relinquish her position.

        While I admire your optimism, her appointment and acceptance were so irregular as to make her service questionable from the start.

      • Lance,

        Why ruin the fun?

        Everyone can easily tear down The_Critic, while they might be less expressive in their reactions and responses if they knew I was Betty White, Senator Claire McCaskill, Robert Wagner, former Senator Fred Thompson, former Governor Gray Davis, Rosalynn Carter, Laura Bush, Rachel Ray, Harriett Miers, Michael Chang, Rev. Jessie Jackson, Oprah, the reincarnation of Woffman Jack, Bristol Palin, Denzel Washington, Steven Seagal, Julie Chen, Rev. Oral Roberts, Coach Jimmy Johnson, Terry Bradshaw, Terry Hogan, Julie Andrews, the Fonz, or just plain old everyday Zorro. But I am not in their league (or am I? Nay). At least their names are entertaining.

    • In a perfect Republican world, there would be no government-backed reverse mortgages, or any kind of government involvement in housing finance, for that matter. It would be strictly up to the private sector, for better or worse.

      • HECM Dude,

        I believe you are expressing the views of Senators Goldwater (of the past) and Coburn. That is like attributing the views of Senator Eugene McCarthy (of the past) and Claire McCaskill to the entire Democratic Party. Can I legitmately say no Democrat supports HECMs based on Senator McCaskill’s statements?

        Personally, my views were well represented by President Ronald Reagan in whose Administration the HECM program was being developed until passage and enactment in the President GWH Bush Administration. The HECM program was not created or fostered under a Democratic Administration.

        As a Republican and an American who will soon be 62, I would love to see proprietary reverse mortgages grow and flourish. I guess you would not? Other loyal Republicans like Peter Bell (LOL), expressed a view similar to mine on proprietary reverse mortgages not that many years ago.

        Like many statements of our current President, I find your comment somewhat offensive but very, very polarized and polarizing.

        I do not care for the views of Elizabeth Warren like you probably do not care for those of former Govenor Sarah Palin. I am not a supporter of either one although my views are more akin to those of the former Governor’s.

  • Good day,

    The new consumer protection bureau, more power in the hands of so few. The regulatory reform bill is far more damaging to the American economy and the American people than any other bill passed thus far.

    The consumer protection bureau is a spin off this bill. The community bankers can’t be happy with the bill or the bureau. The bill is calling for over 5,000 pages of regulation change. The small community banker can’t afford to stay in business or hire the staff necessary to comply and administer the regulations.

    I see many small community banks either failing or merging with the large banks. I foresee the large banks dominating lending, banking and investments. I see a monopoly heading our way that will be controlled by the federal government.

    This is my opinion, however, I know many share my views. As the Critic said, “There are good parts in the bill, overall it is a huge risk designed by one political party with a very slanted view on financial transactions”.

    I go one step further by saying the “Financial Regulatory Reform” bill needs to be repealed, revoked, done away with entirely. We need to start over again with a new beginning. We can take parts that are good in the bill and still use them. I am NOT suggesting dissecting the bill, many politicians would like just that to take place! I repeat myself in saying, we must start all over again, from scratch. If we do not, we will all be experiencing a living nightmare!

    Thank you,

    John A. Smaldone

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