Monday, November 2, 2009

Consumer Financial Protection Agency ("CFPA") – what's inside?

So the Consumer Financial Protection Agency ("CFPA") made it out of two House Committees last week: the Financial Services Committee and the Energy and Commerce Committee. I have blawgged before about what the legislation entailed, but that was when it was first proposed by the Administration over the summer. I wanted to follow-up with a review of what the bill looks like coming out of the Committees (and onto the House floor for a vote) (though note, early Senate sentiment is not looking too keen).

No plain vanilla provision. Let's review. At its most basic level, the vanilla provision required private financial companies to offer a standard version of whatever financial product they offered. So if for example, a private company offered consumers credit cards: the federal government would create a very basic, easily understood credit card product that the private financial company would be required to offer alongside any sophisticated credit card product.

Actors exempt from CFPA oversight include: banks with assets of $10 billion or less; insurers (ie. mortgage or title insurance); attorneys, accountants, real estate brokers, cable companies, and auto dealers. So the last few make sense, keep in mind that the intent of the CFPA is to rein in predatory credit lending and credit related products.

Watt-Moore Amendment. Recall that the legislation was originally going to allow co-regulation by federal and state regulators over the private financial actors. The battle has been lost, however: current language allows for the Comptroller of the Currency to override state laws if they interfere with federal regulation. Your guess is as good as mine as to what that means (though my money is on federal pre-emption continuing unabated).

Also recall that over the summer the CFPA was proposed as an enormous umbrella capacity for regulating all things related to consumer financial products >> taking regulatory authority from existing federal agencies, and pooling it under the auspices of the CFPA. Some of that made it out of Committee: the Federal Trade Commission (FTC) has lost oversight of the consumer credit rating agencies to the CFPA.

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