October 2009 Developments - 33

Sandra “Sam” DePoy, RRP (3) (4) (5) (6) expertise to design ﬁnancial products that respond to consumer demand at an efﬁcient price. Small institutions will be disadvantaged. Many ﬁnancial institutions— particularly small institutions— would be discouraged from offering alternative products tailored to meet consumer needs. In a market dominated by a governmentmandated product, the legislation would give large institutions clear advantages over smaller ones that cannot afford to incur costs of offering, marketing, and distributing non-“plain vanilla” products, let alone offer them at a competitive price. Inconsistent and duplicative standards will become the norm. CFPA only exacerbates the inconsistencies and conﬂicts among consumer protection mandates. Overlapping and inconsistent standards will become the norm and lead to uncertainty and confusion. Rather than adopting a new national standard and preempting multiple conﬂicting state laws, the proposal would do the exact opposite. Banking regulation will be rolled back. CFPA would roll back banking regulation by 150 years by subjecting nationally chartered banks to state consumer protection laws. Economic recovery will be impeded. To recoup the large-scale costs associated with creating and administering a new federal bureaucracy, the CFPA would impose a new tax on all covered entities—even though this is exactly the wrong time to impose new fees on the very businesses that are critical to increasing the availability of credit and jumpstarting the economy. Consumers will bear the burden of these new costs. (7) Unnecessary and costly litigation will increase. The proposed legislation would increase the costs and inefﬁciencies of private litigation by granting the CFPA authority to prohibit mandatory arbitration clauses. Furthermore, Section 1042 authorizes state attorneys generals to sue for the violations of any provisions of the bill or regulations promulgated thereunder. What makes this provision particularly troubling is the fact that certain AGs will outsource these actions to private plaintiffs’ lawyers, often with little oversight from either the state AGs or state legislatures. Using private law ﬁrms driven by proﬁt motive to enforce federal law and policies sets up an inherent conﬂict that is not always beneﬁcial to the public. (8) Key terms are ill-deﬁned. Certain key terms (“covered person,” “consumer ﬁnancial protection,” and “ﬁnancial activity”) are overly broad and will cause sweeping and costly changes for businesses of every size and sector that receive or extend credit. Many of these companies have little or nothing to do with consumer ﬁnance. (9) The approval process for new products will be slowed. While it does exempt activities and persons already regulated by the SEC and CFTC, it will require the SEC and CFTC to coordinate with the CFPA in product approvals or rule-makings for any products that are “similar” or that “directly compete” with CFPAcovered products. This is vague, does not establish recourse if there is disagreement among agencies, and will drastically slow the process for all products. Again, while ARDA understands the importance of moving forward in response to the current economic and ﬁnancial crisis, we have called upon Congress to pursue a thorough deliberative process on this bill. There needs to be adequate time for all stakeholders (including Congress, the business community, and consumers) to fully understand this bill’s implications, how it will impact consumers and their access to credit, the true costs of creating such an agency, and whether a new stand-alone consumer protection agency is necessary—or whether enhancing the regulatory power of existing agency can accomplish the same goal. The precarious state of the economy makes it a particularly dangerous time to enact legislation without a clear understanding of its full impact on the business community at large. House Financial Services Committee Chairman Barney Frank (D-MA) has called for a full Committee mark-up to be held in late September. ARDA will continue to meet with members of the Committee and voice our concerns on this issue prior to the mark-up session. Term Asset-Backed Securities Loan Facility (TALF) The timeshare industry has been particularly hard hit by the credit liquidity crisis. The industry’s fundamentals are sound, and there continues to be consumer demand for timeshare. However, the continuing credit market dislocation has created a very signiﬁcant and immediate liquidity crisis for timeshare developers October 2009 • Developments

October 2009 Developments

Table of Contents for the Digital Edition of October 2009 Developments