The House Financial Services Committee, by a 39-29 vote, has approved H.R.3126, the Consumer Financial Protection Agency (CFPA) Act of 2009.
Introduced by Committee Chair Barney Frank, D-Mass., H.R.3126 is a pared-down version of the agency originally envisioned and proposed by President Obama. A provision that was heavily scrutinized by bankers, the requirement for ‘plain vanilla’ products, was left out of Frank's bill.
Another major point of contention in the original CFPA proposal allowed the federal agency to set a regulatory floor, meaning more stringent regulations could be developed on a state-by-state basis. That provision was changed, and H.R.3126, as approved by the committee, would allow the CFPA to overrule state consumer protection laws in special circumstances and on a case-by-case basis.
In a statement issued Thursday, Treasury Secretary Tim Geithner said the committee's vote represents an "important milestone" in the administration's attempt to reshape the financial system.
‘This bill will create one agency focused on one simple mission: protecting consumers," Geithner said. "While there is more work ahead, today, we are much closer to putting in place strict new rules of the road for the financial industry."
The CFPA legislation approved by the committee also favors smaller financial institutions (i.e., banks with less than $10 billion of assets and credit unions with less than $1.5 billion). While these banks and credit unions would still have to abide by the agency's rules, responsibility for enforcing the rules would remain with the institutions' current regulators.
‘That was a compromise I thought was necessary to get the bill out,’ Frank told reporters, adding, ‘that's the major area many of us would like to change."
During the bill's markup, the committee also approved an amendment from Rep. Gary Miller, R-Calif., to sunset the Home Valuation Code of Conduct (HVCC).
"I have serious concerns with the way in which the HVCC was promulgated, and this amendment would ensure that these standards, which are currently affecting well over 70 percent of the market, go through the rulemaking process to avoid the unintended consequences to consumers that this proposal is producing," Miller said.