House Bill Calls for Consumer Financial Protection Agency

Rep. Barney Frank, D-Mass., on Wednesday introduced HR 3126, a House bill that would enact President Obama’s plan to create the Consumer Financial Protection Agency (CFPA). Proponents said in establishing the CFPA, HR 3126 — The Consumer Financial Protection Agency Act of 2009 — strengthens protection for consumers who purchase financial products like mortgages, credit cards and other loans from banks and non-bank financial institutions. “Recent reports about the lack of mortgage modifications and increases in various fees only reinforce the need for this bill, which is already very clear,” Frank said in a statement released by House Committee on Financial Services, which he chairs. “I am confident that we will produce a bill that will provide greater consumer protections while in no way burdening the legitimate activities of responsible banking.” House Speaker Nancy Pelosi, D-Calif., said the act will help curb abusive lending practices. “The financial crisis exposed consumer safety as a major gap in our system of financial regulation. Unscrupulous providers peddled exotic and risky, and sometimes fraudulent, financial products that consumers often didn’t understand. We now know that these risky practices contributed to record foreclosures, a financial crisis of unprecedented proportions, and a recession we’re still recovering from,” Pelosi said in a statement released by her office. “This is the right thing to do for all the consumers who lost their homes and who were subject to abusive mortgage lending and credit card practices.” The Financial Services Roundtable has criticized the proposed agency, because, the group said in a statement, it would separate regulation of financial products from the regulation of financial institutions. “The Consumer Financial Protection Agency would actually harm consumers by increasing the cost of financial products, and reducing the availability of credit and consumer choices,” the Roundtable President and CEO Steve Bartlett said in the statement. “This would further create a patchwork of 50 state regimes, which will stifle innovation and increase confusion to the consumer.” The bill faces opposition on both sides of the aisle, on concerns the proposed agency would only create a new layer of bureaucracy without providing real regulation, and that it might take too much power away from the Federal Trade Commission (FTC). “We need smarter regulation, not just more regulation,” Texas Rep. Jeb Hensarling, the ranking Republican on the House subcommittee on financial institutions and consumer credit, told The Los Angeles Times. “The legislation essentially says that when it comes to financial products, if we will only yield our freedoms, if we will only yield our consumer choices, if we will only yield our market-driven innovations to a group of unelected philosopher kings, they will undoubtedly rule us with wisdom and justice. Forgive me, I do not buy it.” Frank was joined by 12 other House Democrats as co-signers of the bill, but Rep. John Dingell, D-Mich., told The Washington Times he was skeptical of the plan because it would diminish the FTC’s power. “I am not of the view that maybe we want FTC to lose that [consumer protection] jurisdiction,” he said. “Maybe we want FTC to be around to provide minor dampening of the rascality that’s going to continue to occur in the financial services industry.” Write to Austin Kilgore.