Regulatory bill is bad news for consumers
Jill onMoney
While most Americanswere glued to former FBI Director James Comey’s testimony before Congress recently, financial regulatory legislation flew under the radar.
House lawmakers passed a bill that would gut theDodd-Frank financial reform legislation of 2010. If passed in its current form, the Financial Choice Actwould give the president the power to fire the heads of the Consumer Financial Protection Bureau and the FederalHousing FinanceAgency, which oversees FannieMae and Freddie Mac, at any time for any reason. Itwould also give Congress power over the CFPB’s budget, which means that lawmakers could defund the agency entirely.
That’s a shame, because in the six years since the CFPBwas established, it has provided nearly $12 billion in relief for more than 29 million consumers. The CFPBwas created out of Dodd-Frank in order to create a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial marketplace. The agency’s main goals are to:
Root out unfair, deceptive or abusive acts or practices by writing rules, supervising companies and enforcing laws.
Solicit and respond to consumer complaints. Enhance financial education. Research the consumer experience of using financial products.
Monitor financial markets for new risks to consumers.
The CFPB has cracked downon the credit card industry, debt collectors, payday lenders, for-profit colleges, mortgage companies and banks. The potential defanging of the bureauwould be a big loss formillions of Americans. Unfortunately, adding to consumer pain is Section 841 of the ChoiceAct, whichwould repeal the Department of Labor’s fiduciary rule, the first phase of whichwent into effect on June 9.
As a reminder, the Labor Department’s fiduciary rule stipulates that anyone who handles retirement assets and gives financial advice to retirement savers mustwork in their clients’ best interest and provide disclosure of conflicts, when they exist. The rulewas set to be implemented onApril 10, but theTrump administration put a 60-day hold on it to determine howthe rulewould affect the near $3 trillion dollar retirement savings industry.
Labor SecretaryAlexanderAcosta decided the rulewould not be further delayed and so on June 9, Phase One of what I am calling “fiduciary-lite” went live. Why lite? Because the rule will not be enforced until the Labor Department determines whether the second part of the rule, which is where consumer legal protectionswould be enacted, is necessary.
PhaseTwo is supposed to be implemented on Jan. 1, 2018; until that time, the Labor Department will not enforce the rule.
Even in its original form, the fiduciary rulewould only apply to retirement accounts; in non-retirement accounts, many professionals will still be held to a lesser standard, called “suitability,” which means what they sell you or advise you to do has to be appropriate, though not necessarily in your best interest.
While the rule remains in limbo, it’s important to knowthat there are about 80,000 financial professionals who already adhere to the higher fiduciary standard. Your best bet is to ask your adviser or broker if he or she is required to followthe fiduciary standard.
Contact Jill Schlesinger, senior business analyst for CBSNews, at askjill@JillonMoney.com.