Too Soon to Approve of Consumer Protection Act?

“The Dodd–Frank Wall Street Reform and Consumer Protection Act” seems to have won at least one battle since being signed into law on July 21 by President Barack Obama.

The nearly 2,300-page financial reform act was the only piece of legislation to receive the approval of more than half of Americans polled in a recent Gallup poll. About 61 percent of participants responding that they were in support of the act, according to article, by Lydia Saad on the Gallup website.

The poll, conducted in the last week of August, surveyed more than 1,000 participants, and asked whether or not they approved of the five major actions taken by congress in the last two years. These actions also included the bail-out of auto-makers, bank bail-out, the economic stimulus package, and the health care reform act, according to the survey. Of these five pieces of legislation, the poll found that government aid to major financial institution was the least popular, followed closely by the health care reform.

The public as reflected in this poll are not alone in their support. In speaking with Congressmen Rush Holt this summer for an article on the impact this bill would have on local banks, he seemed to be an enthusiastic and genuine supporter of the bill, particularly the creation of a new Bureau of Consumer Protection. This bureau, he said, will give consumers a government agency whose responsibility it is to look out for their financial well-being.

The caution against such optimism is that the new legislation is not exactly a financial reform act. Rather, the Wall Street Reform and Consumer Protection Act is a framework for financial reform, calling for the creation of hundreds of new regulations to be created. And with so many regulations to write, it is too soon to tell how and when these regulations will come into affect.

But one thing is certain. The not-yet-created bureau will not protect consumers against certain financial transactions, most notably lending practices in the automotive industry. Automobile purchases account for one of the largest financial commitments the average consumer makes. The average amount financed through auto finance companies on a car was more than $28,000 in 2009, according to statistics released by the Financial Reserve. These statistics can be accessed at http://www.federalreserve.gov/releases/g19/Current/

Yet, auto dealers successfully lobbied for an exemption. Ironically, while 61 percent of the people surveyed were in support of the act, the 56 percent of people disapproved of the bail-out of the automotive industry. While the motives of such an exemption need to be examined before condemning the measure, it remains a significant breach to the overall spirit of the assertion that this bureau will protect the consumer from abuse in all areas of their personal finance. And with more 2,300 pages outlining rules yet to be written, who knows what other exemptions will come to the light.


For more information about the results of the poll, “Among Recent Bills, Financial Reform a Lone Plus for Congress,” the article on Gallup.com can be accessed at: http://www.gallup.com/poll/142967/Among-Recent-Bills-Financial-Reform-Lone-Plus-Congress.aspx