By Mark Huffman and James Limbach
ConsumerAffairs.com
October 22, 2009
President Obama's proposal to create a new regulatory agency to protect consumers in their dealings with the financial services industry cleared a key House committee Thursday.
The House Financial Services Committee voted 39 to 29 to pass the Consumer Financial Protection Agency Act of 2009 and send it to the House floor.
The bill would create a federal agency whose sole purpose is to protect the financial interests of consumers in their dealings with businesses engaged in financial services, such as credit cards and mortgages. It would have broad power to write new regulations. The bill faces stiff opposition from the financial services industry.
Democrats tend to support the measure and Republicans tend to oppose it. In the committee vote, only one Republican voted in favor while only two Democrats voted against it.
Consumer groups, naturally, are strong advocates.
"To succeed the CFPA must have the oversight and enforcement authority to end the predatory practices that have pushed tens of millions of families over the financial brink but that regulators under the current system failed to stop," said Michael Calhoun, president of the Center for Responsible lending. "We look forward to working with members on both sides of the aisle as the CFPA legislation moves to the House Energy and Commerce Committee and then to a vote by the full House."
"As the bill moves forward, we expect further battles to weaken the bill, especially attacks on its critical provision re-establishing federal law as a floor not ceiling of consumer protection," said Ed Mierzwinski, Consumer Program Director for US.PIRG. "We also anticipate battles to fix a few troubling provisions snuck into the bill, especially exceptions for car dealers and credit life insurance firms. But the underlying bill is sound and todays vote is the first step toward final action this year to establish a single agency that regulates all financial products to protect consumers from predatory lending."
Presidential backing may not be enough
"The Consumer Financial Protection Agency will prevent predatory lending practices and other abuses and will ensure that consumers get clear information they can understand about financial products like credit cards and mortgages," President Obama said in a statement.
Despite the President's strong support and Democrats' control of both chambers, the outlook for the measure remains uncertain, especially in the Senate, where some Democrats have expressed strong reservations. The Senate Finance Committee, pre-occupied with health care, has yet to act on the measure.
The American Bankers Association has tempered some of its criticism of the legislation, saying recent changes to the measure "represent improvement." However, banking industry lobbyists are still not on board.
"ABA remains opposed to this legislation because we still have major concerns with some principal areas, including restrictions on preemption standards for national banks and savings associations, and the very broad, ill-defined authority that is granted to this new agency that could be used to justify essentially any regulatory action," said Floyd E. Stoner, executive vice president for congressional relations & public policy for ABA. "We will continue to raise these concerns as the legislative process moves forward."
Faster due date for credit card rules
The House Financial Services Committee also voted Thursday to pass the Expedited CARD Reform for Consumers Act of 2009. That legislation simply moves up the effective date of changes to credit card rules passed by Congress in May.
The legislation outlaws some of the industries long-standing consumer abuses but does not begin the new rules until February 2010. Credit card companies have been busy raising rates on existing balances and other activities that will be outlawed by the new rules.
The measure passed by the House committee today would move the effective date up to December 1. Again, the outlook remains uncertain, as the measure must be approved by the full House and be taken up by the Senate, which has not yet acted.
