Consumer protection agency passes House committees
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PrintTwo committees of the U.S. House of Representatives approved a bill that will establish a new federal agency to protect consumers. The Consumer Financial Protection Agency (CFPA) will be an independent government entity that will be mandated to protect Americans from abuses in financial products and services.
The bill also extends consumer protection to a host of financial industries, such as payday lenders and mortgage originators, which have long escaped oversight.
The House Financial Services committee voted 39-29 and the House Energy and Commerce Committee voted 33-19 to approve the new consumer protections. It is now ready for consideration by the full House of Representatives.
Among the CFPA's core responsibilities are
- Rulemaking and enforcement of financial institutions that provide consumers with financial products and services
- Rulemaking under the existing consumer banking laws will be transfered from the Federal Reserve to the CFPA
- Educating consumers on financial products and services
- Analyzing and reporting on current and prospective developments in consumer financial products and services
- Receiving consumer complaints and initiating investigations and taking enforcement actions based on findings
The legislation is sponsored by Representative Barney Frank (D-MA).
Testifying in the House Financial Services committee, Michael Calhoun, President and Chief Operating Officer, Center for Responsible Lending, a non-profit, non-partisan research and policy organization, said, "The financial oversight system we have today is fundamentally broken, hobbled by conflicts of interest and strong incentives to ignore lending abuses. Nowhere is this more starkly evident than in the area of consumer protection."
In testimony to the same committee, David C. John, on behalf of the Heritage Foundation, said, "Even with the most recent changes, creating a new agency would be a huge mistake that would hurt consumers far more than it helps them. A CFPA would raise costs for consumers, reduce the number and kind of products available to them, increase the micro-management of financial-services firms, and greatly increase the confusion caused by differing and conflicting consumer laws in the different states."
