CFSL Bulletin The latest Consumer Financial Services Litigation news, developments, and legal thinking

Tag Archives: Barney Frank

Barney Frank: No Fed-Based CFPA For Me!

Posted by Martin J. Bishop on Posted in Consumer Financial Protection Agency

Responding to "Gridlock May Be Ending on Consumer Protection," an article published today in The New York Times by Edward Wyatt and Sewell Chan, Representative Barney Frank fired off a press release stating unequivocally that, "I do not support housing the Consumer Financial Protection Agency in the Federal Reserve."

According to The New York Times, regarding a Fed-based CFPA:

Mr. Frank said he could consider the idea if it were accompanied by robust ability to issue rules independently of other regulators. If not, he vowed, “I won’t bring it to the House.”

No sooner than the Times article hit the newsstands and the web, Rep. Frank issued a press release which provides, in its entirety:

House Financial Services Committee Chairman Barney Frank (D-MA) issued the following statement to clarify comments made in today’s New York Times that he would consider a financial consumer watchdog housed in the U.S. Federal Reserve. This is not the case.

“I do not support housing the Consumer Financial Protection Agency in the Federal Reserve. I continue to vigorously support the House-passed bill that establishes an independent agency with strong rule-writing authority and enforcement powers to implement consumer protections. I could, if necessary, support housing this important function in the Treasury Department, provided that the entity has sufficient independence and broad regulatory scope to accomplish the mission of protecting consumers.

“My main objection to housing this critical function in the Federal Reserve has been the central bank’s historical failure to implement consumer protection as a central part of its mission and role.”

Plainly, the debate over the issue of where to house the CFPA rages on. At this point, a possible compromise is less than evident. 

Stay tuned to The Bulletin for the latest news.

Death Knell Ringing For An Independent CFPA?

Posted by Martin J. Bishop on Posted in Consumer Financial Protection Agency

Nobody knows the banking system like the Fed. What better place, then, to house a consumer financial protection agency (CFPA)? The Fed’s insight into the banking system leaves it well-positioned to develop, coordinate, and implement new and existing rules applicable to credit cards and other consumer financial services products. Rather than create a completely new federal bureaucracy to govern the regulation of consumer financial services products, as proposed by the House of Representatives, the Senate proposes a more measured response: house the CFPA in the Fed.

As Craig Torres and Yalman Onaran of Bloomberg Business Week are reporting in their article, “Consumer Agency Within Fed Seen as Victory for Banking Industry,” the debate about whether to have an independent CFPA boils down to this:

Banks say placing the agency with the Fed alleviates their concern that an independent entity would ignore the health of the financial system. Consumer advocates say it’s a mistake because the Fed didn’t succeed in curbing abuses during the subprime lending boom that contributed to the worst financial crisis since the Great Depression.

Representative Barney Frank, chair of the powerful House Financial Services Committee, calls the Senate proposal “a joke,” and has lashed out at the Fed, calling its track record of consumer protection its “most conspicuous failure.” On the other hand, Senator Chris Dodd, chair of the Banking Committee, is pushing a CFPA that would create a bureau within the Treasury Department or within a new overarching bank regulator that would have authority to write consumer-protection rules.”

So what is the likely outcome? Negotiations in Washington are accelerating, but the issue is so divisive that attempts to find middle ground could thwart the entire effort. As Jim Kuhnhenn reported in the AP, “Dodd, Corker regulatory offer gets cool reception,” when the new proposal came up yesterday in the Banking Committee, it achieved virtually no traction.

Stay tuned…

Barney Frank: The Credit CARD Act Is Working

Posted by Martin J. Bishop on Posted in Credit CARD Act

Today — the first day that many of the key provisions of the Credit CARD Act go into effect — Representative Barney Frank, chair of the Financial Services Committee, issued a press release in which he claims the Act is working and credit card holders are reaping the benefits. In support of the claim, Rep. Frank links to a PDF of a couple of letters from credit card companies. Representative Frank’s press release is reproduced below:

Washington, DC – Today, Financial Services Committee Chairman Barney Frank (D-MA) released the following statement on the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, and commented on the following letters that credit card companies have been sending to their customers as a result of the new law’s implementation.

“These letters indicate that Americans are now seeing the benefits of the CARD Act. It was unfortunately the case that some banks tried to game the system after we passed the bill into law, but their actions provide further evidence of our need for a Consumer Financial Protection Agency. While the House did pass a bill to speed up the implementation date of the CARD Act, there was an inevitable delay in the legislative process and Republican objections in the Senate blocked the bill. Had the CFPA been in existence we could have moved right away to block the banks’ egregious actions.”

In May, President Obama signed into law the Credit CARD Act, historic legislation that will protect consumers from deceptive credit card practices and equip them with the information and rights they need to responsibly manage their credit. Today, most of the key reforms are set to go in to effect, including prohibition of arbitrary interest rate increases and interest charges on debt paid on time (double-cycle billing ban).

For more information, click here.

Barney Frank Fires Back At “Innaccuracies”

Posted by Martin J. Bishop on Posted in Consumer Financial Protection Agency

Representative Barney Frank, chair of the House Financial Services Committee (“FSC”), has issued a memorandum to the members of the FSC addressing certain issues raised by various news publications. The substance of the memorandum is as follows:

Some inaccuracies have appeared in the press about institutions exempted from the reach of the Consumer Financial Protection Agency in the House-passed financial reform bill. For instance, yesterday’s New York Times reported that it “exempted smaller community banks, credit unions, retail merchants …”. Not true. All of those institutions will be subject to all rules issued by the agency with respect to the extension of credit. They also will be subject to agency enforcement. The exemption for smaller financial institutions is only with respect to examination which will continue to be the responsibility of the institutions’ prudential regulators. However, the CFPA will have back-up inspection authority and may independently take enforcement action. And even this exemption is limited to institutions with less than 2% of bank assets.

Importantly, the new agency will also have authority with respect to the now lightly or unregulated institutions such as pay day lenders and check cashers firms which are especially important to lower income families. It also will have authority over independent mortgage brokers and lenders that led the industry in issuing subprime and abusive option ARM mortgages.

Consumer protection has long been a weak link in our system of financial regulation and the meltdown of the subprime mortgage market is only the most dramatic example of the consequences of our failure in this area. The President’s position on closing this gap is of great importance.

Leading consumer protection advocates unanimously support the President. Harvard professor Elizabeth Warren said when the House bill passed, “the banks lost today.” That same day, Travis Plunkett from the Consumer Federation of America said that “The CFPA will allow consumers to shop or take out a loan knowing that there is an agency looking out for their best interests.”

Click here to read the memo as it appears on the FSC’s website.

Debate Rages On Over Structure Of Consumer Financial Protection Agency

Posted by Martin J. Bishop on Posted in Consumer Financial Protection Agency

Representatives Barney Frank and Henry Waxman are debating the leadership structure of the agency to be created by the pending Consumer Financial Protection Agency Act of 2009. Rep. Frank is looking for a structure with a single director whereas Rep. Waxman is looking for leadership in the form of a five member bipartisan commission. For more on this debate, see The Hill’s Blog here and here.