House committee passes creation of consumer protection agency

10.23.09
By Timothy Jones

The House Financial Services Committee recently approved a new federal consumer protection agency that is intended to help people with things like personal loans.

The committee approved the creation of the Consumer Financial Protection Agency (CFPA) by a 39-29 vote which mostly fell along party lines. The new agency is part of the Obama administration's attempt to further regulate the financial system in the country.

"This bill has now passed a major hurdle and this step sends an important signal to the American people that we will not stand by and allow big financial firms and their lobbyists to mobilize against change," President Obama said in a statement.

In the measure passed by the House committee, the CFPA would be able to write rules regarding financial products, including personal loans and mortgage loans. The regulatory power of the CFPA would come from taking the responsibilities and powers of a number of other federal departments.

However, the version of the CFPA passed by the House committee did take away a number of provisions suggested by the Obama administration. For example, the idea of forcing lenders to offer products that are described in plain English was not included in the measure passed by the Financial Services committee.

Also, banks that have assets amounting to less than $10 billion would not be covered by the agency, nor would credit unions with assets less than $1.5 billion. Also, auto dealers were exempt from the CFPA, as were gift cards.

Massachusetts Democratic Representative Barney Frank, who chairs the committee that passed the creation of the CFPA, recently called for the effective date for other reforms to be moved up. The second round of provisions from the Credit Card Accountability, Responsibility and Disclosure Act are slated to take effect on February 22 of next year, though Frank wants them to take hold on Dec. 22 of this year, though Federal Reserve Chairman Ben Bernanke said that might not give lenders enough time.

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A congressional financial committee passed a bill that would create the Consumer Financial Protection Agency.