U.S. PIRG Applauds House Committee Vote to Advance Landmark Consumer Agency to Replace System that Failed

Media Contacts

Calls For Changes to Special Interest Loopholes for Car Dealers, Credit Life Insurance Firms, Others

WASHINGTON, Oct 22 — The U.S. House Financial Services Committee approved landmark reform legislation Thursday, establishing a proposed Consumer Financial Protection Agency, despite “often blatantly false attacks from industry opponents.” Although several exceptions to the agency’s coverage must still be addressed on the House floor or in the Senate, overall, the CFPA bill as passed creates an independent agency with broad authority to protect consumers in the financial marketplace.

“Consumers need protection from unfair financial marketplace practices, protection that they didn’t get from the regulatory system that failed and left our economy in ruins,” said Ed Mierzwinski, Consumer Program Director of U.S. Public Interest Research Group. “That’s why we need a strong Consumer Financial Protection Agency and that’s why the committee rejected the often blatantly false attacks from industry opponents.”

Mierzwinski added that the Obama-backed Consumer Financial Protection Agency, as passed, has authority to write rules for all financial products and to enforce those rules if violated. Although smaller banks and credit unions will have primary enforcement by their current regulator, the CFPA will write all the rules and has authority to step in over those primary regulators when they fail to do their jobs as well as to enforce them over all bigger banks and all non-banks.

“It is critical that the CFPA’s provision re-establishing federal law as a floor not ceiling of protection, allowing states to pass stronger laws, not be eliminated as the bill moves further through the legislative process,” Mierzwiski added, noting that full consideration of the U.S. PIRG-opposed Bean (IL) preemption amendment to strip the bill’s provision restoring federal law as a floor not a ceiling of protection was delayed without a vote but could still occur on the House floor.

Mr. Mierzwinski also warned that a few special interests did succeed in adding loopholes to the bill that must still be addressed as the bill moves forward:“Even though many car dealers make unfair and discriminatory loans, the Campbell (CA) amendment added to the bill would exempt them from most coverage and may even allow them to make unregulated payday and predatory loans.”

“Further, over-priced credit life, disability and unemployment insurance will continue to be carved out from full consumer protection under the committee-approved Moore (WI) amendment.” In addition, an important proposed amendment by Rep. Maxine Waters to ensure that all private student loans would be regulated by CFPA was narrowly defeated.

The Consumer Financial Protection Agency is sponsored by committee chairman Barney Frank (MA) and others and is supported by President Obama as a core piece of his financial reform platform. The bill must still be considered by the House Energy and Commerce Committee and the full House as well as the Senate Banking Committee and the full Senate.

“Despite massive efforts by the big banks, Wall Street and the U.S. Chamber of Commerce whose members helped cause the worst financial calamity since 1929, there is still a good chance for final passage this year of strong legislation creating a tough consumer agency to replace the broken regulatory system that failed to protect consumers or taxpayers,” Mierzwinski concluded.