Progress Illinois

Yesterday, the proposal to create a Consumer Financial Protection Agency (CFPA) cleared a major hurdle when it passed the House Financial Services Committee. Regular readers know that the future of the agency -- which has been a top priority for consumer advocates critical of the federal government for its lax regulation of predatory lending and other risky financial products -- has seemed touch-and-go at times. After months of heavy lobbying by the banking industry and the willingness of the conservative "New Democrats" (led by Illinois' own Melissa Bean) to do their bidding and weaken the agency's proposed powers, the CFPA bill (H.R. 3126) was approved with its teeth largely intact.  That being said, portions of the original bill were certainly weakened, according to the Wall Street Journal:

Lawmakers made several significant changes to the White House's original proposal during a week of debate, particularly in response to lobbying from business groups. For example, they voted overwhelmingly to exempt automobile dealerships from any scrutiny by the new agency, a major win for dealerships that rake in high fees from auto financing. That change may not make it into the final version of the legislation.

The agency would be charged with policing consumer financial products and practices, such as mortgages, credit cards, and overdraft fees, regardless of whether they are offered by banks, finance companies, or most any other type of firm.

Consumer advocates are keeping the pressure on to see that some of those banking-friendly concessions are reversed as the bill winds its way through Congress. “It is time to end the practice of putting profits over the interests of ordinary Americans and our economy as a whole," said SEIU Secretary-Treasurer Anna Burger in a statement (the SEIU Illinois State Council sponsors this website). While calling the House committee's vote "an important milestone," Burger adds, "we must continue working with leaders in both chambers to make this bill even stronger and enact strong reforms that will protect us from future bank-induced crises." Among her recommendations for additional reforms:

-Oversight of auto dealers who receive lucrative compensation in financing auto loans;
-The authority to examine the books of all financial institutions, no matter what size, without cumbersome barriers;
-Fixes to the current compensation system which pressures and incentivizes workers to push and sell bad and unneeded products to consumers as a condition of employment;
-And the full authority to stop the sale of credit-related insurance policies that are virtually worthless.

Attorney General Lisa Madigan echoed her sentiments in a statement released on the eve of House committee vote:

Responsible borrowers—both individuals and businesses—are now literally paying for the failure of federal regulators that were either unable or uninterested in protecting consumers ...

Now more than ever, American consumers need protection from the kinds of abusive and predatory practices that led us to this economic crisis.

These reforms are essential to preventing another financial collapse.

We'll continue following this bill closely.