Barney Frank has issued a "Discussion Draft" of the Consumer Financial Protection Agency Bill. Hearing on this will be Wed. Sept. 30 @ 10 EST.

and some things just haven't changed, from Section 122(e)(2) and (3) of this new draft:

"(2) REFERRAL.—Any Federal agency authorized to enforce a Federal law described in paragraph (1) may recommend in writing to the Director that the Agency initiate an enforcement proceeding as the Agency is authorized by that Federal law or by this title. The recommendation shall be accompanied by a written explanation of the concerns giving rise to the recommendation.
(3) BACKSTOP ENFORCEMENT AUTHORITY OF OTHER FEDERAL AGENCY.—If the Agency does not, before the end of the 120-day period beginning on the date on which the Agency receives a recommendation under paragraph (2), initiate an enforcement proceeding, the other agency may initiate an enforcement proceeding as permitted by that Federal law."

and something else that received very little press, didn't change from the 1st CFPA draft to the 2nd, and is worth studying for the administrative burden it imposes:

Subtitle G—Regulatory Improvements
Sec. 171. Collection of deposit account data.
Sec. 172. Small business data collection.

for deposit accounts: "(d) AGENCY USE.—The Director—
(1) shall assess the distribution of residential and commercial accounts at such financial institution across income and minority level of census tracts; and
(2) may use the data for any other purpose as permitted by law."

(5) SMALL BUSINESS LOAN.—The term ‘small business loan’ shall be defined by the Agency, which may take into account—
‘‘(A) the gross revenues of the borrower;
‘‘(B) the total number of employees of the borrower;
‘‘(C) the industry in which the borrower has its primary operations; and
‘‘(D) the size of the loan.

The goal is to identify loan applications from minority and women-owned businesses....Underwriters cannot know of this data-gathering, unless they also inform the prospective borrower -

http://www.house.gov/apps/list/hearing/financialsvcs_dem/ed_yingling_-_aba.pdf

In his testimony, Mr. Yingling highlights a few more sections of the revised draft that give CFPA unprecedented power:
Sections 131, 133, and 136(a)

He and someone who works at the Heritage Foundation both suggest that changes to the FFIEC could accommodate most of what this CFPA seeks to accomplish to both coordinate regulatory efforts and protect consumers appropriately.

Frank's "Manager's Amendment" just passed House Financial Services Committee - voice vote, probably along party lines. GOP members voicing complaints about adding another agency, estimated costs to consumers (1.6 basis points) - to no avail.

Looks like amendments generally related to "carving out" financial institutions < = $10 billion in assets (and credit unions < $1.5 billion in assets) from CFPA examinations (but not necessarily some sort of back-stop examination/enforcement) are passing. BUT - CFPA would retain rulemaking, and in a way this just muddies the waters. Personnel in the current regulatory agencies who focus on consumer regulations may or may not be funded to transfer to the CFPA - so where would they go?

Frank hopes to have the amended CFPA bill voted out of committee sometime between 5PM and 6PM EST today. More hearings scheduled Tuesday 10/20/09.

From ABA this morning:

Amendment Allows Bank Regulators to Examine Smaller Banks for CFPA Compliance

During the House Financial Services Committee’s consideration of the Consumer Financial Protection Agency bill (H.R, 3126) yesterday, the panel approved an amendment by Reps. Brad Miller (D-N.C.) and Dennis Moore (D-Kan.) that would allow banks with $10 billion or less in assets to be examined by their primary regulator for compliance with CFPA rules, rather than by CFPA examiners. Bank regulators also would have primary enforcement authority. However, all banks still would be subject to rules issued by the CFPA, and the new agency would have back-up exam authority.

ABA has advocated that all banks’ prudential regulators should have examination and supervision authority for both safety and soundness and consumer protection. While the Miller-Moore amendment does not go that far, it is an improvement for most ABA members, and ABA will continue to push to expand the measure.

Roll call votes going on now about keeping the level of federal pre-emption - nays have it pretty much on a party line vote. So it's looking like the states will have more regulatory authority, assuming some version of the CFPA passes. Without reading the amended legislation, I don't know how the states might be funded to enforce any regulations they pass or have on potentially hundreds of additional financial service providers they'd "oversee" in each state.

http://financialservices.house.gov/schedule.html to link to live stream.

http://www.property-casualty.com/News/20...el-Votes--.aspx

"NU Online News Service, Oct. 22, 11:04 a.m. EDT

WASHINGTON—A House committee has voted to totally exempt insurance companies and their products from oversight by a proposed U.S. Consumer Finance Protection Agency...."

Seen anything yet on the other votes this morning? I know they are meeting at 2:00 ET to vote on Credit CARD bill, but haven't been able to find results of morning votes.

It's onto the full House -39-29. Best article I've seen so far -
http://www.politico.com/news/stories/1009/28607.html#

I'm still not clear on what firms and industries were exempted from what.

from summary http://financialservices.house.gov/Key_I..._of_HR_3126.pdf :

Nonfinancial Businesses Exempt
Merchants, retailers and other nonfinancial businesses will be excluded from the regulation and oversight of CFPA when they extend credit directly to consumers for the purchase of goods or services. Merchants and retailers can continue to give their customers tabs and layaway plans without becoming subject to new regulation as long as they do not resell the credit. Also, doctors and other businesses that bill their customers after a service is provided will be excluded.
• Credit and other financial activities of nonfinancial business will continue to be subject to the Truth in Lending Act and other consumer statutes as they are today.
• The Federal Trade Commission will continue its longstanding oversight role for these activities.

Other Exemptions
In addition to providing clear exclusions for securities, commodities, investment and general insurance products (other than financial planners), the following other businesses will not be subject to CFPA regulation for acting in their traditional capacities:
• Accountants and tax preparers,
• Real estate brokers and agents;
• Lawyers;
• Auto dealers; and
• Providers of IRAs, 401(k) plans, 529 plans and pension plans.

Is no one going to comment at all on this issue???? This is by far the most widespread and far reaching legislation to affect bankers in my lifetime. Phoenix has done a great job of restating the provisions in the legislation but here's some more highlights:
• The CFPA has all rule-writing responsibility to which all banks will be subjected. In other words, the CFPA will make the rules and all banks, regardless of size, will be subject to them. The primary federal banking regulatory agency will initially have the ability to enforce them.
• These rules are the broadest we've ever imagined for a federal regulatory agency. The objectives will include limitations on overdraft fees, debit card and credit card fees, and a host of other fees that are connected with any kind of consumer product or service;
• The new agency will have specific authority to regulate compensation.
• The amendment specifically allows CFPA employees/examiners to be a part of any examination conducted by the primary federal banking regulatory agency.
• The CFPA may recommend that an enforcement action be taken against a community financial institution. If the federal banking agency does not take the action, the CFPA may proceed to do so.
• Even though examination authority is delegated, if the CFPA determines through the consumer complaint system (authorized elsewhere in the bill) that a community financial institution is not complying with CFPA mandates or other consumer laws or regulations, the CFPA may investigate, take enforcement actions and revoke its delegation of authority.
• The CFPA retains the authority to require community financial institutions to file reports, including annual or special reports, and to respond in writing to specific questions, as the director of the CFPA may require, as part of the CFPA's authority to conduct research on financial products and services.
• The CFPA also retains the authority to require reports of community financial institutions, and review databases, as part of the CFPA's duty to monitor risks to consumers.

Is no one else worried about the new agency but me???

Let's see - the ABA reports that over 150,000 letters have been sent to Congress, so yes, there have been a lot of comments.

We need more, now that various muddling amendments were included before the CFPA Bill passed the House Financial Services Committee. Here's one article about the massive, dangerous powers of the proposed CFPA head: http://www.nationalmortgagenews.com/lead_story/?story_id=115

I'm concerned about the various exemptions because I think they will muddy the waters about what firms are affected, vs. what aren't, and who can examine what, when; who can regulate what, when; where will any funding come to produce or enforce any regulations, etc. The net effect appears to be something likely to be VERY expensive and INeffective on both the federal and state levels, to the discouragement of financial service providers and consumers alike.

If anyone has seen a link to the amended CFPA bill, please post.

Yes. . . agreed the ABA has reported many comments, but none in here! I'm afraid that some folks are too worried about the trees to see that the whole forrest may be burning.

I agree wholeheartedly with you regarding funding of this agency, enforcement actions issued directly by this agency and as a whole it looks like a lose-lose situation for bankers and consumers. It's just that consumers don't know anything about it yet. Washington's too busy running a health care smoke screen for the average consumer to see what's being let in the back door.

Here is the Marked-up bill passed by Barney Frank's committee: http://energycommerce.house.gov/Press_111/20091029/text_CFPA_CP.pdf

A good summation of the changes:

http://www.aba.com/aba/documents/winnews/CFPA_HouseBillSidebySide_102309.pdf

and from ABA newsbytes:

"Second House Panel to Consider CFPA Bill
The House Energy and Commerce Committee today will consider two parts of the Consumer Financial Protection Agency bill (H.R. 3126) that deal with the transfer of Federal Trade Commission authorities to the proposed new agency. Committee Chairman Henry Waxman (D-Calif.) is expected to offer an amendment to the legislation that would create a five-member board -- appointed by the president and confirmed by the Senate -- with members having staggered five-year terms. The bill as originally introduced called for a five-member board, but it was changed to a 12-member board during House Financial Services Committee consideration of H.R. 3126 last week. "

http://energycommerce.house.gov/

Energy and Commerce Committee Markup
Markups
Wednesday, 28 October 2009 15:11
The Energy and Commerce Committee will meet on Thursday, October 29, 2009, at 1:00 p.m. in room 2123 Rayburn House Office Building. The committee will consider H.R. 3126, the Consumer Financial Protection Agency Act of 2009.

more "law of unintended consequences":

http://www.nytimes.com/2009/11/13/opinion/13carney.html?_r=1

"....Mr. Dodd’s new proposal may also wind up dealing a serious blow to consumers — and the economy. If banks find themselves unable to raise rates, many will limit their risk by severely restricting consumer credit. Many people will find their credit cards canceled, and new customers will be turned away. This will come on top of an already tight consumer credit market: banks sent out 2.1 billion direct-mail credit card solicitations in the third quarter of 2006, according to the research firm Mintel; this year in the same quarter, they sent out 391 million. A further contraction in consumer credit could devastate our nascent recovery....

The Federal Housing Administration requires a down payment of at least 3.5 percent on mortgages it guarantees. But because homebuyers can recoup up to $8,000 from the tax credit and apply it to the down payment, they can buy a home worth up to $228,000 without spending a dime. ..."

buried in open-end credit reg analysis, haven't had a chance to analysis the latest Congressional moves, but this article seems to be a reasonable recap:

http://www.financialreformwatch.com/2009...mble/index.html

"....Next Tuesday, December 8th, the House Rules Committee will reassemble into one large package all of the bills the Financial Services Committee considered separately. That package will include the two bills approved yesterday as well as legislation covering the Consumer Financial Protection Agency (H.R. 3795), over the counter derivatives (H.R. 3126), executive compensation and corporate governance (H.R. 3269), and mortgage reform and lending standards (H.R. 1728).

....The Senate Banking Committee has not yet scheduled any (financial reform-related) hearings beyond today’s nomination hearing for Fed Chairman Ben Bernanke, but it is safe to assume that the committee will be fixated on financial reform for the rest of December and probably well into the new year."

link to 1279 omnibus House bill: http://docs.house.gov/rules/finserv/111_hr_finsrv.pdf

I'm no longer sure what the House passed, but here's the ABA's quick take:
- no mortgage cramdown
- CFPA, with OCC pre-emption of state laws/regs pretty much intact
- SOX exemption for small institutions

One blog suggested that the final package, including whatever of the 250 proposed amendments that may have passed, is now up to 1500 pages (what's another few trees?). If no one else does, I'll update the link to HR 4173 as soon as I can....

I'm convinced the House has no idea what they've passed either.

Here's a link to a page on the House Financial Services Committee's web site that addresses HR 4173.

http://financialservices.house.gov/Key_I...ory_Reform.html

and the Library of Congress' logging of what happened before the House passed it:
http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR04173:@@@S (you'll need to copy/paste this into your tool bar)

I was fascinated to hear, during its annual review of compliance "hot topics", the ABA use the phrase "price controls" in referring to several aspects of proposed changes to our industry.

Here are a couple of paragraphs from http://www.reuters.com/article/idUSN25386402 about price controls over food that may be worth remembering, should we ever be able to analyze HR 4173 and its potential impact on the availability of banking services to consumers:

"....International economists warn that price controls and other interventions lead to market distortions such as reduced supplies because they discourage domestic production, processing and trade. By dampening the underlying causes of inflation, price controls prevent market solutions, these experts say.

....According to experts, controls are only likely to work where staple foods are a small share of total household spending, or when controls are implemented for a very short time, such as in Morocco in Ramadan. If price controls are kept too long, odds increase for a precipitous and destabilizing jump in prices...."

and for those of us who may wish to recall:

"....In 1971, U.S. President Richard Nixon imposed a 90-day freeze on wages and prices to tame inflation above 4 percent, a level thought to be intolerable at the time.

The 90 day freeze turned into nearly 1,000 days and by the time the wage and price controls were mostly dismantled by April 1974, the U.S. inflation rate had exceeded 10 percent...."

CBO estimate on cost: http://www.cbo.gov/ftpdocs/108xx/doc10844/hr4173asreported.pdf

interesting that all of the reduced budget allocations are assigned to next year, even though the table (p. 4 of 5) gives year by year estimates for 2010-2019.

American Banker summary of 1336-page Dodd bill:
http://www.americanbanker.com/issues/175_50/drilling-down-dodd-1015945-1.html?ET=americanbanker:e2540:1563977a:&st=email

Link to the Dodd bill:
http://banking.senate.gov/public/_files/...slationBill.pdf

Looks like first markup will be
EXECUTIVE SESSION to MARK-UP an original bill entitled: Restoring American Financial Stability Act of 2010
Monday, March 22, 2010
04:00 PM
538 Dirksen Senate Office Building

Check out p. 1216 - 1220 (sections 1071 and 1072) for reporting requirements similar to what the House passed:
"(1) RECORDS REQUIRED.—For each branch, automated teller machine at which deposits are accepted, and other deposit taking service facility with respect to any financial institution, the financial institution shall maintain a record of the number and
dollar amounts of deposit accounts of customers.
(2) GEO-CODED ADDRESSES OF DEPOSITORS.—
Customer addresses shall be geo-coded for the collection of data regarding the census tracts of the residences or business locations of customers.
(3) IDENTIFICATION OF DEPOSITOR TYPE.—In maintaining records on any deposit account under this section, the financial institution shall record whether the deposit account is for a residential or commercial customer.
(4) PUBLIC AVAILABILITY.—
(A) IN GENERAL.—Each financial institution shall make publicly available on an annual basis,...."
all this "to promote awareness of the availability of financial services" (!)

then the CRA/HMDA equivalent on steroids for small business lending:
"....in the case of any application to a financial institution for credit for a small business, the financial institution shall—
‘‘(1) inquire whether the small business is a women- or minority-owned small business,....
clearly and conspicuously disclose—
‘‘(A) the number of the application and the date on which the application was received;
‘‘(B) the type and purpose of the loan or other credit being applied for;
‘‘(C) the amount of the credit or credit limit applied for, and the amount of the credit transaction or the credit limit approved for such applicant;
‘‘(D) the type of action taken with respect to such application, and the date of such action;
‘‘(E) the census tract in which is located the principal place of business of the small business loan applicant;
‘‘(F) the gross annual revenue of the business in the last fiscal year of the small business loan applicant preceding the date of the application;
‘‘(G) the race and ethnicity of the principal owners of the business;....

because I guess banks just don't do enough - business?!!!