House committee approves consumer financial protection agency legislation

House committee approves consumer financial protection agency legislation

[JURIST] The US House Financial Services Committee [official website] voted 39-29 Thursday to approve [press release] a bill [HR 3126 materials] that would create a Consumer Financial Protection Agency. The agency would regulate mortgages, credit cards, and other consumer credit instruments. Businesses that offer financial services such as car and home mortgage loans would be monitored by agency authorities. Although the agency would have examiners with vested authority to enter financial institutions, the bill states that all but the largest banks would be spared from such close scrutiny, including retailers, car dealers, accountants, and lawyers. Unlike existing regulatory agencies that have authority only over particular types of institutions, the Consumer Financial Protection Agency would have greater breadth in its institutional oversight. Treasury Secretary Timothy Geithner [official profile] hailed the bill [press release] as:

an important milestone in our efforts to reform the financial system.

This bill will create one agency focused on one simple mission – protecting consumers. While there is more work ahead, today we are much closer to putting in place strict new rules of the road for the financial industry.

The controversial agency has been rigorously opposed by the banking industry. Geithner appealed to Congress not to weaken the bill in the face of attacks from the American Bankers Association and the Chamber of Commerce [organization websites], which led a $2 million advertising campaign opposing the legislation.

The Financial Services Committee passed the legislation after originally delaying [JURIST report] it at the behest of financial industry leaders in July. The creation of the agency is a key step in the Obama administration's plans to tighten financial industry regulations. The administration originally proposed a broad series of financial regulatory reforms [press release] in June, calling [JURIST report] for the creation of a Consumer Financial Protection Agency, among other reforms.