Capitol Hill Debates Consumer Protection Agency

Posted by Orb Staff on July 15, 2009 No Comments
Categories : Residential Mortgage

ama administration's proposed Consumer Financial Protection Agency (CFPA) is among the headline items on lawmakers' agendas again this week, with the Banking Committee holding a hearing on the matter Tuesday and a similar hearing scheduled for the House Financial Services Committee today. The need for a consumer protection agency ‘could not be clearer,’ Michael Barr, the Treasury's assistant secretary for financial institutions, testified in the Senate. A single, federal regulator, in order to be effective and independent, would need three qualities, he said: mission focus, market-wide coverage and consolidated authority. In his opening remarks, Barr alluded to the proposed agency's critics. "Entrenched interests always resist change," he commented. "Major reform always brings out fear mongering. But responsible financial institutions and providers have nothing to fear." American Bankers Association President and CEO Edward Yingling said a consumer regulator should not be enacted because it would separate banking business regulation from banking product regulation. "Consumer protection is not just about the financial product; it is also about the financial integrity of the company offering the product," he told the Senate. The administration's proposal would also place a disproportionate burden on community banks, Yingling said, before addressing the proposal's ambiguous language. "The proposal goes beyond simplifying disclosures – which is needed – to require that all bank communication with consumers be "reasonable,'" he noted. "This is a term so vague that no banker would know what to do with it. "But not to worry," he added, tongue in cheek, "the proposal offers to allow thousands of banks, and thousands of nonbanks, to pre-clear all communications with the agency." The House hearing is expected to detail H.R.3126, the Consumer Financial Proection Act of 2009, which was recently introduced by Rep. Barney Frank, D-Mass., and Rep. Maxine Waters, D-Calif., and which seeks to legislatively progress Obama's proposed agency. John Courson, the Mortgage Bankers Association's president and CEO, is among those scheduled to testify before the House today. In prepared remarks, Courson said he is concerned whether a separate new regulator will achieve the objective of smarter and more effective regulation of all aspects of the financial services market. "Not only does H.R.3126 establish the rules of the CFPA as a "floor,' the bill actually invites state regulators to promulgate additional rules, thus worsening the patchwork of laws and increasing disparities in regulation and costs to consumers," Courson said. SOURCES: House Financial Services Committee, Senate Banking Co

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