Consumer Protection Act Passes Committee Vote. HVCC Amendment Added

Legislation to create an agency designedrnto protect consumers from abusive and deceptive loans including credit cardrncontracts and mortgages, moved another step closer to passage on Thursday.  The House Financial Services Committee votedrn39 to 29, mostly along party lines, to send HR 3186, the Consumer FinancialrnProtection Act (CFPA) to the full House for consideration.

In a separate vote, the Committee alsornmoved up the implementation date for a credit card law that had passed earlier tornDecember 1.  The regulations whichrngovern, in part, the way interest rates can be raised, were originally set torngo into effect in mid-February but there has been a storm of consumerrncomplaints as the banks have rushed to hike rates ahead of the deadline.

CFPA, which has been fought furiously byrnbanks and credit card companies, will establish an independent executive branchrnagency to regulate the provision of consumer financial services and products.   Itrnwill incorporate the consumer protection functions of the Federal Reserve, thernOffice of Thrift Supervision, the Federal Deposit Insurance Corporation, Officernof Comptroller of the Currency, the Federal Trade Commission and the NationalrnCredit Union Administration.  Many ofrnthese regulators have been faulted for a lack of oversight of financialrninstitutions prior to last year's financial collapse.

The bill passed the house with arncompromise on two major points.  Manyrnlegislators with ties to the banking industry had pushed for the legislation tornpreempt all state regulations which are often stronger or more forcefullyrnpursued by local authorities.  The ObamarnAdministration had strongly fought this preemption, wanting the states tornretain full enforcement authority.  Insteadrnthe bill will authorize the Office of the Comptroller of the Currency whichrnregulates national banks to intervene only if it found that state law “significantly”rninterfered with federal policies.

The second compromise was the exclusionrnof a number of merchant categories from the law.  This came in response to an aggressivernadvertising campaign by the U.S. Chamber of Commerce which claimed that the lawrnwould cover “butchers, bakers, and teachers.”   The Committee inserted language specificallyrnexcluding merchants, retailers, and other nonfinancial businesses even whenrnsales involved the provision of credit.  

Financial Services Committee Chairman BarneyrnFrank (D-MA) said he was optimistic that the bill would pass the full House andrnSenate by the end of 2009 or early in 2010. rnPresident Obama who has strongly banked financial regulation hasrnrequested the bill on his desk by the end of the year.

In a statement issued by the White Housernshortly after the vote the President praised the Committee saying, “This billrnhas now passed a major hurdle, and this step sends an important signal to thernAmerican people that we will not stand by and allow big financial firms and theirrnlobbyists to mobilize against change.”

Harvard Law Professor Elizabeth Warrenrnwho serves as Chair of the Congressional Oversight Panel for the TroubledrnAssets Relief Program has been a public face of the legislation, appearing onrnmany news shows to urge its passage.  At arnpress conference after the vote she said, “… when I first came tornWashington with the idea of this agency, everyone told me: “The banks alwaysrnwin. Quit now, because the banks always win.” They didn't win today. ChairmanrnFrank has done something that is historic here… I never thought I would seernthis day, so I am delighted.”

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