The New Consumer Financial Protection Act

The Obama Administration unveiled its well-promoted Consumer Financial Protection Agency Act of 2009, its plan to improve the regulation of the mortgage industry and other issuers of consumer credit. Some would say this act means real progress. But it isn't. It's just a re-hash of laws we already have.  

For example, here are some previous laws:

The first was enacted in 1968, the Consumer Credit Protection Act. Sound familiar? Included in this Act is the Truth in Lending Act. Here is some of the language from that law:

"It is the purpose of this subchapter to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit."

Sounds good. That was followed by these other laws:

• Regulation Z issued by the Federal Reserve Board
• The Real Estate Settlement Procedure Act enacted in 1974
• The Equal Credit Opportunity Act enacted in 1974
• The Truth in Lending Simplification and Reform Act of 1980
• The Garn-St. Germain Depository Institutions Act of 1982
• The Fair Credit Reporting Act

And a new one, the Mortgage Disclosure Improvement Act, goes into effect in a couple of weeks.

I read the new Act. It runs to 156 pages. I found about 152 pages of gobbledegook and just four sections that have anything of substance. Sadly, even those sections are in the "feel good" language so common to lawmakers. So what does the new Act propose to do for us?

"The purpose of such model [mortgage] disclosure shall be to facilitate compliance with the disclosure requirements of those titles, and to aid the borrower or lessee in understanding the transaction by utilizing readily understandable language to simplify the technical nature of the disclosures,"

And in a later section:

"….in order to help persons borrowing money to finance the purchase of residential real estate to better understand the nature and costs of real estate settlement services."

Sound familiar? Bottom line: Legislators are plowing the same turf and are going to come up with the same fancy-sounding propaganda. Then they will all stand around and congratulate themselves and go back home and run for re-election.

Shakespeare said it better:

It is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage andSavvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics forCreditBloggers.com.