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These payments incentivizeoriginators to steer consumers to higher-priced or inappropriate mortgages. In addition, the CFPA could consider requiring that originators receive a portion of their compensation over time, contingent on loan performance, rather than in a lump sum at origination.Impartial advice represents one of the most important financial services consumers can receive. Currently, debt counselors advise distressed and vulnerable borrowers on how to manage and reduce their debts. Mortgage brokers often advertise their trustworthiness as advisors on difficult mortgage decisions. When these intermediaries accept side payments from product providers, they can compromise their ability to be impartial. Consumers, however, may retain faith that the intermediary is working for them and placing their interests above his or her own, even if the conflict of interest is disclosed. Accordingly, in some cases consumers may reasonably but mistakenly rely on advice from conflicted intermediaries. It is unfair for intermediaries to take advantage of that trust.

Filippo Cardone Banker Cash-basis accounting: Expenses and revenues aren't carefully matched on a month-to-month basis. Expenses aren't recognized until the money is actually paid out, even if the expenses are incurred in previous months, and revenues earned in previous months aren't recognized until the cash is actually received. However, cash-basis accounting excels in tracking the actual cash available.

If the same carpenter uses accrual accounting, his bottom line is different. In this case, he books his expenses when they're actually incurred. He also records the income when he completes the job on December 31, 2004, even though he doesn't get the cash payment until 2005. His net income is increased by this job, and so is his tax hit.

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Finally, we propose to harmonize the statutory and regulatory regimes for futures and securities. While differences exist between securities and futures markets, many differences in regulation between the markets may no longer be justified. In particular, the growth of derivatives markets and the introduction of new derivative instruments have highlighted the need for addressing gaps and inconsistencies in the regulation of these products by the CFTC and SEC.Prior to the current financial crisis, a number of federal and state regulations were in place to protect consumers against fraud and to promote understanding of financial products like credit cards and mortgages. But as abusive practices spread, particularly in
the market for subprime and nontraditional mortgages, our regulatory framework proved inadequate in important ways. Multiple agencies have authority over consumer protection in financial products, but for historical reasons, the supervisory framework for enforcing those regulations had significant gaps and weaknesses.

We propose that federally chartered institutions be subject to nondiscriminatory state consumer protection and civil rights laws to the same extent as other financial institutions. This would restore a fairer and more measured approach to the roles of the states with respect to federally chartered institutions. We also propose that states should be able to enforce these laws, as well as regulations of the CFPA, with respect to federally chartered institutions, subject to appropriate arrangements with prudential supervisors. With respect to state banks supervised by a federal prudential regulator, the CFPA will be the primary consumer compliance supervisor at the federal level. Maintaining consistency among fifty states’ supervisory and enforcement efforts will always remain a significant challenge, but the CFPA’s concurrent supervisory and enforcement powers should place it in a position to help. The CFPA should assume responsibility for federal efforts to help the states unify and strengthen standards for registering and improving the quality of providers and intermediaries.

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