Banks, Congress Still Bickering Over Consumer Finance Bureau

Wednesday, May 04, 2011 06:36
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Banks, Congress Still Bickering Over Consumer Finance Bureau

Tags: Congress | FINRA | sec

The banking industry's struggle with the formation of the Consumer Financial Protection Bureau can be illuminating for advisors trying to frame their own regulatory concerns.

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Bankers are still funding efforts in the House of Representatives to dilute or delay the CFPB's creation. 

 

The unifying theme of these bills seems to be hatred of Elizabeth Warren, the Harvard professor who initially spearheaded calls for the new group in the first place.

 

Love her or hate her, the interesting thing here is how the veteran lobbyists of the American Bankers Association frame their resistance to the CFPB.

 

If your problem with regulation is that it could be used against you -- that it's a "two-way street" and there are consumers out there eager to fleece the banks -- then you're automatically on the defensive.

 

Blaming the aggressive, tricky American consumer for bullying the hapless banks is not the way to play this.

 

For one thing, it flies in the face of common sense. Sure, there are good bankers and bad customers, but no sane person would agree that banks need a more level playing field to protect them from consumers -- banks own the playing field!

 

For another, financial institutions are strongest when they can at least muster the illusion that their interests are aligned with those of their clients. The goal here is not to drive a wedge between the institution and its clientele, but to ensure that they work together.

 

Now compare this to the advisory industry and its struggles with what looks like a heavy regulatory burden ahead.

 

Did any stockbroker ever need to be protected from his or her aggrieved clients? It's an interesting image, but who wants to project that kind of defensive posture?

 

Besides, the truth is that clients have only a vague appreciation for their advisors' needs. They don't really care how hard it is to do your job, or how expensive it might be to keep up with regulations. They just want service they can trust.

 

That's what they pay for. If the banks could accept that, they might be able to change their revenue model for the better, offer better service, and even stop being afraid of regulation.

 

 

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