A bait-and-switch occurs whenever a product is advertised to draw consumers, but an inferior product is then sold. The creation of a Consumer Financial Protection Agency (CFPA) has been advertised as necessary to protect consumers, but the proposal (H.R. 3126) represents an extraordinary empowerment of government at the expense of the consumer. It is so broad in scope that it may go beyond the jurisdictional reach of all existing federal financial agencies, ultimately punishing consumers by increasing the cost of credit, limiting consumer choices, and further restricting access to credit while empowering the government and enriching trial lawyers.
The definitions that set the boundaries are so expansive that the CFPA could have authority over virtually any U.S. business. For example, the proposal would give the CFPA jurisdiction over ANY financial activity, product or service to be used by a consumer. The definition of "any financial activity" is to be determined by the agency. The proposal's definition of a "covered person" would give the CFPA jurisdiction over anyone who engages "directly or indirectly in a financial activity" or "provides a material service" to anyone who engages in a financial activity. The proposals definition of credit includes "the rights granted by a person to a consumer to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment for such purchase." The Federal Trade Commission has so broadly interpreted that definition that the CFPA could assert jurisdiction over any entity, service provider, or individual that permits a consumer to defer payment and/or accepts installment payments for goods or services rendered.
ISSUES OF CONCERN
Below is a short list of people and businesses that are not traditional financial institutions but would likely be subject to regulation and oversight by the proposed CFPA:
1. Churches and faith-based organizations (who perform credit counseling)
2. Funeral providers (who extend credit)
3. Executors of Estates and other wealth management and trust services (custodians of money)
4. Dave Ramsey, Suze Orman and Ric Edelman (financial adviser is included in the definition of "financial activity")
5. Casinos and other gambling facilities (who extend credit)
6. PayPal and Western Union
7. Colleges, Universities and non-profit organizations (for administering a financial literacy program)
8. Landlords and real estate agents (the leasing of real property is considered a "financial activity")
9. Wal-Mart, Target, Macy's and other retail stores (who extend credit)
10. Starbucks, Chili's, Applebee's and other restaurants (who sale or issue stored value cards)
11. Payday Lenders
12. Avis, Budget and Enterprise (the leasing of personal property is considered a "financial activity")
13. Attorneys and Escrow Companies (as custodians of money or any financial instrument)
14. CPAs and Attorneys (for tax planning and preparing)
15. Chicago Title (real estate settlement activities are included in the definition of "financial activity")
16. Advertising Agencies (marketing or advertising financial products are included in the definition of "financial activity")
17. Pawn shops
18. And the catchall -"Any other activity that the Agency defines, by rule, as a financial activity."