Since the introduction of legislation outlining the creation of the Consumer Financial Protection Agency
(CFPA), the House Financial Services Committee
made significant changes to the Administration's proposals before voting last week in approval
of House Resolution 3126 (HR 3126).
One change present in the approved bill is the clarification of what entities would fall under CFPA oversight, according to an analysis by global law firm K&L Gates
When introduced, HR 3126 included entities that provide financial products and services to consumers, except for entities regulated by the Securities and Exchange Commission
(SEC) or Commodity Futures Trading Commission
(CFTC). This led to an outcry, including a media campaign by the US Chamber of Commerce
, that the CFPA would hurt small businesses that offered lines of credit to customers.
As amended, HR 3126 exempts retailers, insurers and other non-financial businesses from CFPA oversight. Consumer reporting agencies, however, would be subject to CFPA oversight, and if made law, would remove them from Federal Trade Commission
(FTC) oversight. Auto dealers that make loans and hold them on their books would be subject to oversight, but dealerships that don’t keep the loans would not.
K&L Gates also wrote community banks with less than $10bn in assets and credit unions with less than $1.5bn in assets will be subject to oversight by their primarily regulator rather than the CFPA, in an amendment passed in mid-October. However, the CFPA will be empowered to send examiners along with the primary regulator to observe examinations.
One item not covered in the original legislation, but added later, is a provision that requires the CFPA to “prescribe regulations regarding registration requirements for non-depository covered persons,” K&L Gates said.
The board and structure of the CFPA was also changed. As written, the legislation calls for a Senate-confirmed single director appointed by the president for a five-year term. Two boards, a consumer advisory board and a consumer financial protection oversight board, will advise the director. These boards will be staffed by a number of heads of the federal government’s financial oversight entities, and the director will appoint five additional members from various fields.
K&L Gates said it’s likely the House Financial Services Committee will continue to markup other financial regulatory reform legislation over the next few weeks and the full House of Representatives could consider the legislation before the Thanksgiving recess. Senate consideration of similar legislation isn’t expected until next year.
Write to Austin Kilgore