House Passes Consumer Financial Protection Agency Act
On December 11, 2009, the U.S. House of Representatives passed the “Wall Street Reform and Consumer Protection Act of 2009,” H.R. 4173. This sweeping legislation—a combination of several bills, including a modified version of the Consumer Financial Protection Agency Act, formerly HR 3126—includes broad new regulation of derivatives, executive compensation, systemic risk, investor rights, mortgages, credit-rating agencies, hedge funds and private equity, insurance, and consumer financial protection.
Title IV of the Act (sections 4001 – 4901) provides for the creation of a Consumer Financial Protection Agency (section 4101 – 4703), a new, independent federal agency to oversee virtually every aspect of consumer financial services, including mortgages, credit cards, debit cards, car loans, gift cards, credit reporting agencies, debt collectors, and financial advisers. Certain merchants, such as auto dealers and pawnbrokers, would be exempted.
Consumer financial protection functions would be transferred (section 4601) to the new Consumer Financial Protection Agency from the Federal Reserve Board of Governors, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, and the Secretary of Housing and Urban Development. Among other powers, the Consumer Financial Protection Agency would be responsible for enforcing laws governing consumer credit.
The Act also provides for the creation of a Consumer Financial Protection Oversight Board (section 4103), to ensure consistent consumer financial protection regulations, and a Consumer Advisory Board (section 4106) to advise and consult with the CFPA regarding consumer laws and industry practices.
Significantly, the Act calls for changes to current laws and regulations regarding preemption of state law (sections 4401 - 4410) and pre-dispute arbitration provisions (section 4208).
Separately, the U.S. Senate is working on its own version of consumer financial protection legislation.
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