Today, the Financial Services Committee approved legislation that will establish a new, independent federal agency solely devoted to protecting Americans from unfair and abusive financial products and services. The Committee’s press release states as follows:
As called for by President Obama, the Consumer Financial Protection Agency (CFPA) represents one of the most significant efforts by Congress to bring about long overdue financial reform and ensure that Americans are able to take advantage of capitalism’s benefits without falling victim to industry abuses. As last year’s crisis demonstrated, deceptive financial products – such as predatory mortgages and hidden credit card fees – not only damage the livelihoods of American families, but can destabilize the entire economy. ¶ The creation of the CFPA will finally put the interests of consumers at the forefront of the federal government’s attention and enforcement efforts. As outlined in H.R. 3126, the agency’s mission will be to promote a fair and transparent marketplace for financial products and to safeguard the American public from abusive industry tactics. In an unprecedented move, the bill also extends federal supervision to a host of financial industries, such as payday lenders and mortgage originators, which have long escaped oversight. ¶ A summary of the bill, which was approved by a vote of 39-29, can be viewed here. The committee today also defeated a large number of Republican amendments intended to prevent or weaken the CFPA. ¶ “The Committee vote today is a rifle shot at abusive financial practices, not a shotgun blast that would hit community banks making an honest living from fair lending practices. It’s no surprise that the lenders with the worst practices are still fighting tooth and nail against this bill. The last thing they want is to have to make an honest living,” said Rep. Brad Miller (D-NC). ¶ “Protecting consumers is a must in any new financial regulatory system, and the Consumer Financial Protection Agency will help make that happen. I commend Chairman Frank for his leadership on these issues, and I look forward to working with him and other Members as we move forward in the process to improve not only CFPA, but the rest of the financial regulatory reform package so we can strengthen protections for all consumers, investors and taxpayers,” said Rep. Dennis Moore (D-KS). ¶ “We need a brand new agency with consumer protection as its sole mission. A Consumer Financial Protection Agency that looks after the interests of consumers will also benefit responsible lenders and safeguard the safety and soundness of our financial system,” said Rep. Keith Ellison (D-MN). ¶ Currently, consumer protection rule-making and authority is spread across several different agencies, all of which have failed repeatedly to use the tools provided by Congress to protect Americans. H.R. 3126 addresses this inaction by transferring consumer protection authority from the Federal Reserve and other banking regulators to the CFPA. The consolidation of these powers at the CFPA also ensures that financial firms will no longer be able to shop around for the weakest regulator to supervise their products. ¶ In addition, the agency will closely monitor the marketplace for any new financial products or services that could potentially harm consumers as well as the larger economy. Once the agency identifies these threats or abuses, it will have the power to write rules that can regulate, restrict or ban them. It will also have the power to establish guidelines so that companies issue clear and fair disclosures to customers on products such as credit cards and mortgages.