The Consumer Financial Protection Bureau (CFPB) was established by the Dodd-Frank Act for the purpose of protecting consumers engaged in financial transactions.  Pursuant to Section 1079 of the Dodd-Frank Act, the CFPB was charged with reviewing the 1031 exchange qualified intermediary industry and making recommendations on any regulations or legislation that would better protect consumers.  The charge was prompted by a number of failed qualified intermediaries in recent years. Since 2007, several large 1031 exchange companies, including a publicly traded company, and several smaller companies, filed for bankruptcy because of theft of exchange funds by new company owners or bad investment policies. All resulted in the loss of significant 1031 exchange funds for taxpayers nationwide.

The Federation of Exchange Accommodators (FEA) is the national trade association for 1031 exchange practitioners and 1031 CORP. has been a member since 1994. FEA leadership and members of our Government Affairs Committee have been steadfastly committed to strengthening industry standards and protecting consumers. Some of the vigorous efforts of the FEA include:

• Requested to the Federal Trade Commission (FTC) for federal oversight of the industry (FTC denied request);
• Submission to Treasury and the IRS of a proposed amendment to Treasury Regulation 1.103(k) -1(g) which would impose standards of funds management requiring investment goals of liquidity and preservation of principal (no changes were imposed);
• Drafted a model law that the states of California, Colorado, Maine, Nevada, Oregon, Virginia and Washington have adopted with some slight variations;
• Creation of the Certified Exchange Specialist® (CES®) Program to create a standard level of knowledge within the industry with required continuing education, including ethics, biennially;
• Worked with insurance carrier who offers fidelity bond coverage specifically designed for 1031 exchange companies to ensure future coverage protects the clients/consumers not the owners of 1031 exchange companies;
• Worked with financial institutions to make Qualified Escrow Agreements and Qualified Trusts readily available and affordable to provide another security option for consumers;
• Made changes in the member Code of Ethics prohibiting commingling of funds and prudent investor standards and began requiring members to agree to adhere when renewing membership; and
• Implementation of background checks on the principals of new members and anyone who controls clients' funds. 

The FEA had several meetings with members of the CFPB and provided requested information, including some that required member surveys. The CFPB report was issued on June 26, 2012, and repeatedly describes the many efforts of the FEA to strengthen industry standards and to protect consumers. The CFPB concluded that although it has authority, it was making no recommendation for additional federal legislation or regulation of the 1031 exchange industry. The FEA welcomed the CFPB review of our industry and remains committed to preserving high industry standards and practices.   

Margo McDonnell served on the FEA Board of Directors from 1997 thru 2008 and was elected again in 2011 and currently serves as secretary.