The package of financial regulatory reforms recently proposed by the Obama administration includes a proposal for a Consumer Financial Protection Agency. According to the document, the agency would "...protect consumers across the financial sector from unfair, deceptive and abusive practices." While this proposal is likely to generate strong opposition from the financial community, the events of the past few years make some form of regulation inevitable. However, stronger regulation of the financial sector, including consumer finance, should be accomplished through the legislative process.
An example of how disruptive bad policies and regulations can be is the recently enacted Home Valuation Code of Conduct, or HVCC. It is an initiative developed by New York's Attorney General Andrew Cuomo, resulting from his investigation into questionable appraisal practices. The Code is designed to insulate appraisers from pressure to inflate the estimated value of properties on which loans are being made. HVCC prohibits any entity paid on commission (mainly brokers) and lenders' loan production staff from communicating directly with appraisers. In most cases, appraisals must be directed to independent entities ("Appraisal Management Companies" or AMCs), which effectively subcontract the work to affiliated appraisers.