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What the New Consumer Finance Agency Means for IA Families and Economy

August 10, 2010

DES MOINES, Iowa - The financial meltdown at the start of the current recession was rooted in part in predatory lending and ballooning consumer debt. But part of the recently-signed national financial reform law is the creation of the Consumer Financial Protection Bureau, which according to Mike Konczal, fellow with the Roosevelt Institute, is designed to help keep consumers from getting in trouble.

"Basically it's saying you shouldn't give a loan to someone who can't pay it, or who you don't believe will pay it. That will decrease fraud on both ends, both on the lenders' side and on the borrowers' side."

Konczal says consumer protection rules were already on the books, but often went unenforced. He says the new agency will focus on things like making credit card contracts clear and fair to consumers.

"If I put four credit card forms in front of you, you would probably not be able to tell which one was the best. So what that might mean is taking these credit card contracts that are 20 or 30 pages and condensing them down to two or three pages."

Dave Swenson, Iowa State University economist, says the new consumer protection agency will impact consumers indirectly.

"The way it is going to impact Iowans, by my estimation, is that it is going to change the rules and the behaviors of those folks who engage the public regarding lending practices."

Republicans in Congress criticized the new agency, saying it added excessive regulation on the financial industry. But Mike Konczal says mortgages and credit card debt had grown so much it became a crisis.

Dick Layman, Public News Service - IA