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Dodd-Frank Legal Issues for Bankers

Dodd-Frank Legal Issues for Bankers. Ann Graham, J.D., M.B.A. Professor of Law, Founding Director Business Law Institute Hamline University School of Law Banking Law Blog: http://lawprofessors.typepad.com/banking/. Consumer Financial Protection Bureau.

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Dodd-Frank Legal Issues for Bankers

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  1. Dodd-Frank Legal Issues for Bankers Ann Graham, J.D., M.B.A. Professor of Law, Founding Director Business Law Institute Hamline University School of Law Banking Law Blog: http://lawprofessors.typepad.com/banking/ Consumer Financial Protection Bureau

  2. Dodd-Frank Wall Street Reform & Consumer Protection Act – signed July 21, 2010 • 2,319 Pages • Federal Reserve Act (1913) - 31 pages • Glass-Steagall Act (1933) – 37 pages • Gramm-Leach-Bliley Act (1999) – 145 pages • Sarbanes-Oxley Act (2002) – 66 pages

  3. Obama Administration Financial Regulatory Reform Plan & Consumer Financial Protection Consumer Regulatory Reform – A New Foundation: Rebuilding Financial Supervision & Regulation (June 17, 2009) Consumer Financial Protection Agency Act of 2009 (June 30, 2009) 80 Law Professors – Letter to Congress (Sept. 29, 2009) “Political Horse-Trading” – Spring 2010

  4. CFPA: Original Plan “Independent” Broad Jurisdiction – all consumer laws & all entities Sole Rulemaking Authority Supervisory & Enforcement Authority

  5. CFP – Why Do We Need It? Elizabeth Warren: “The credit market is broken” Subprime crisis Conflicting missions & incentives for existing agencies Track record of existing agencies Markets cannot work if information is deficient Good products will not gain market share, drive out bad products Public welfare argument

  6. Consumer Financial Protection Bureau – Title X Dodd-Frank Independent Bureau – within Federal Reserve Elizabeth Warren: Assistant to the President & Special Adviser to the Treasury Secretary – Sept. 2010 Organizing the CFPB – By July 21, 2011 Who will be Director? Funding Staffing Prudential Regulation retained for <$10B tot. assets

  7. Mission & scope of authority • Regulate unregulated institutions & products (auto dealers excepted) • Centralize consumer protection, minimize inconsistency • Compartmentalization? • Safety & soundness • Consumer protection • Complementary or Contradictory • The Financial Stability Oversight Council can set aside any CFPB regulation that puts the safety or soundness of the U.S. banking or financial system at risk.

  8. Effect on Community Banks “Community Financial Institutions” & credit unions with total assets of $10 billion or less Prudential regulators retain enforcement authority BUT CFPB regulations will apply

  9. Staffing • Each agency transfers existing consumer protection division • Assures expertise, minimizes start-up time • BUT new entities, products, services • Priorities, staff allocation • Regulation models: • Examination Driven • Complaint Driven • Report Driven

  10. CFPB Offices Office of Fair Lending & Equal Opportunity. Office of Financial Education. Office of Service Member Affairs. Office of Financial Protection for Older Americans. Consumer Complaint Hotline  Consumer Advisory Board

  11. Clarifying Federal Preemption • CFPB sets federal “floor” • States may be more stringent • State consumer protection laws are NOT preempted • Watters v. Wachovia (2007) • Cuomo v. Clearing House (2009) • State/Federal Balance & Dual Banking System

  12. Weighing Costs & Benefits of Regulation A. Regulatory Burden? B. Stifling Innovation? C. Interference with Free Market? D. Protecting those who cannot protect themselves E. Standard: “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers & such injury is not outweighed by countervailing benefits to consumers or to competition” F. No Plain Vanilla

  13. CFPB • Political Reaction • Industry Reaction • ABA, Financial Services Roundtable • Consumer Perspective • Center for Responsible Lending • Large Bank/Small Bank Issues • Are Disclosures Enough? • Plain Vanilla Products?

  14. Consumer Protectionand Bank Compliance • Safety & Soundness depends on Consumer Protection • State AGs can enforce consumer protection laws • Review Policies & Procedures • New Reg Reform Site – Tracks Dodd-Frank • www.stlouisfed.org/rrr/

  15. Articles available: SSRN Ann Graham: SSRN Author page http://ssrn.com/author=391481-------------------------------------------------- The Consumer Financial Protection Agency: Love It or Hate It, U.S. Financial Regulation Needs It Bringing to Heel the Elephants in the Economy: The Case for Ending Too Big to Fail

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