Rep. Frank revises planned U.S. consumer agency bill to meet business demands
By Karey Wutkowski and Rachelle Younglai
WASHINGTON, Sept 25 (Reuters) – Powerful U.S. lawmaker Barney Frank bowed to some of the financial industry’s demands and softened parts of his bill to create an agency to protect consumers from risky financial products, according to a copy of the draft bill first obtained by Reuters on Friday.
Financial Services Committee Chairman Frank expanded on plans to rid the bill of a provision that banks be required to offer “plain vanilla” versions of financial products, such as mortgages with simple terms.
That provision was proposed by the Obama administration and vehemently opposed by U.S. businesses because it might crimp profits if consumers sought out government-sanctioned financial products. Frank’s plans to change key parts of the administration’s proposal were first revealed on Tuesday.
Frank, Congress’ chief author of financial regulatory reform, did not cave to bank regulators’ request to limit the consumer agency’s powers to simply writing rules and enforcing them at financial firms outside the banking sector.
The new consumer agency would have to coordinate with federal bank regulators and conduct exams for compliance with consumer laws simultaneously with exams by federal regulators.
But it leaves the consumer agency with broad powers to examine all financial firms and require reports from the financial firms and other regulators.
The revised bill also largely ignores current bank regulators’ concerns that their agencies’ consumer protection roles would be eliminated and that national banks could have to follow a confusing patchwork of state consumer laws.
Federal Deposit Insurance Corp Chairman Sheila Bair and Comptroller of the Currency John Dugan told lawmakers earlier this week that they support a new agency dedicated to writing strong, uniform consumer protection laws.
But they said their agencies should be able to continue examining banks for compliance.
Frank scoffed at their argument that they should maintain their powers, telling them, “It seems like a new interest for you.”
Frank’s bill leaves in place a provision that Dugan has repeatedly derided, which would force national banks to follow the different consumer protection laws of each state in which they do business.
Currently national banks must follow federal consumer laws, and are largely exempt from having to follow states’ additional protection laws.
“Such uncertainties have the real potential to confuse consumers, subject providers to major new liabilities, and significantly increase the cost of doing business,” Dugan said during a speech to the Women in Housing and Finance business group in Washington on Thursday.
The agency does get powers to establish compensation practices rules for those who provide consumers with financial products or services. But the bill stops short of allowing the consumer agency to prescribe a cap on the amount of compensation.
The 291-page draft bill specifies that the consumer agency would create a central database for collecting and tracking consumer complaints that would be shared with other federal and state regulators.
Frank’s committee will hold a hearing on Wednesday to examine the draft bill.