By Eugene T. Lowe
October 26, 2009

As financial regulatory reform continues to be debated in Congress, White House staff and Congressional staff have provided several briefings to Conference of Mayors staff and city representatives on the progress of the legislation, especially the importance of the Consumer Financial Protection Agency. In general, the CFPA would create a single agency to enforce rules that would ensure fair treatment in the mortgage market, end credit card abuses, and protect retirement security, savings and investments. The financial regulatory reform legislation including the title that would authorize the CFPA was passed on October 22 by the House Financial Services Committee, and will now be considered on the House floor. The Senate is also working toward passage of financial regulatory reform including the CFPA.

Presently, the nation’s financial system is regulated by several regulatory agencies including the Federal Reserve Bank, the Federal Deposit Insurance Corporation, the Office of Comptroller of the Currency, and the Office of Thrift Supervision, each with authority in separate areas of the financial system. The problem is there is a large, unregulated sector of the financial system. In addition, the protection of consumers is fragmented. The regulatory reform legislation through the CFPA would streamline the system and consolidate the functions of the current regulatory agencies.

But in several states and localities, consumer protection statutes will be stronger than the federal law passed under financial regulatory reform. In those situations, it is clear that CFPA rules would be the floor and not the ceiling. Some of the current regulators have expanded preemption regulations over the years, which have weakened stronger state and local laws protecting consumers. Those preemption regulations would be rescinded.

President Barack Obama released a statement after passage of the Consumer Protection Agency by the House Financial Services Committee. “I congratulate the House Financial Services Committee and Chairman Barney Frank on passing a bill out of Committee to establish the Consumer Financial Protection Agency. The Consumer Financial Protection Agency will prevent predatory lending practices and other abuses and will ensure that consumers get clear information they can understand about financial products like credit cards and mortgages,” he said.