By Mark Huffman
ConsumerAffairs.com
June 22, 2010
House and Senate leaders have reached a compromise over differing versions of key sections of financial reform, handing banks a victory on one hand, while dealing them a setback on the other.
According to final language agreed to by both chambers, the new Consumer Financial Protection Agency (CFPA), proposed to protect consumers' interests in dealings with banks and credit card companies, will be part of the Federal Reserve, not an independent agency.
The House version of the financial reform bill established CFPA as an independent agency. Consumer advocates pushed for that, saying the Fed, which currently has responsibility for consumer protection in financial matters, failed in that area in events leading up to the financial meltdown.
Meanwhile, more details have yet to be worked out before the issue is settled. For example, lawmakers remain divided over whether the new agency would have power over auto dealerships.
Banks and other financial services companies opposed any kind of Consumer Financial Protection Agency but appeared less opposed to one that remained part of the Fed.
Retailers vs. banks
In a setback for banks, House and Senate conferees agreed to mandate cuts in debit-card fees, known as "swipe fees," as part of the financial reform bill. Retailers had lobbied hard for the cuts and were delighted at the result.
"Chalk one up for the little guy," said Dennis Lane, a 7-Eleven franchise owner and spokesman for the retail lobby group, Reform Swipe Fees NOW! "The negotiated language is a major step in the right direction, towards putting consumers and small businesses ahead of the interests of big banks and credit card companies. And I am pleased to see the core of Senator Durbin's amendment to rein in excessive swipe fees was preserved."
Earlier this year a bipartisan majority of the Senate approved an amendment to the Wall Street Reform and Consumer Protection Act, offered by Senator Richard Durbin (D-IL), requiring that debit card swipe fees are "reasonable and proportional" to the true cost of transaction processing.
Analysts say retailers could reap a $20 billion windfall by virtue of having to pay banks less money every time a customer uses a debit card. It remains unclear, however, how much of that will be passed along in savings to consumers.
Lawmakers may have been swayed by arguments that retailers would be more likely than banks to use the money to purchase more inventory and hire more people, thus helping grow the economy.
President Obama has urged conferees to wrap up their work this week, before he leaves to meet with fellow heads of state at the G-20 summit.
