RJ and Makay

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Today marks the first anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was designed as a sweeping overhaul of the nations financial regulatory system.  Amid signs that the tightened regulatory structure could still be rolled back, Treasury Secretary Timothy Geithner said Monday that the financial system was “on more solid ground” than at any time since the financial crisis of 2008.

Part of the legislation under the Frank-Dodd law has created disquiet in the financial services industry. The section causing concern states that the Consumer Financial Protection Bureau (CFPB) can limit or bar a product or practice that it deems unfair, deceptive or abusive. The usage of the word ‘abusive’ is causing apprehension among many, who worry that the term could give the agency too much broad flexibility, allowing it to focus its onslaught on whatever it thinks is applicable.

The Federal Reserve Board has had the authorization to ban unfair or deceptive products for a long time, but it used the power only with reluctance, reviewing any such practices on a case-by-case basis.  Rarely, has the central bank acted on these manners, but the Dodd-Frank law removed its authority and placed it with the CFPB, along with adding “abusive” as a category under which it may restrict or ban a product.