Yesterday, the Treasury Department released draft legislative language for the "Consumer Financial Agency Protection Act of 2009." The language, denominated Title X of what was apparently intended as comprehensive reform legislation, follows up on a major piece of the White Paper for regulatory reform that Treasury published on June 17, 2009. The language adheres fairly closely to the discussion in the White Paper. A new Consumer Financial Protection Agency would be created with authority over nearly every statute that affects consumers of banking institutions. In addition to the several credit-related laws, the CFPA would have jurisdiction over the Community Reinvestment Act, Truth in Savings Act, the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, and the privacy provisions of the Gramm-Leach-Bliley Act.

The draft also lays out a complicated structure for the competing roles of the states and the CFPA in enforcing the consumer statutes and includes a significant part for the federal banking agencies. As to the states, the draft allows broadly for state enforcement actions--among other things, effectively confirming the holding in the Supreme Court's decision earlier this week in Cuomo v. Clearinghouse Ass'n, that the states may take judicial enforcement action against national banks The proposal does, however, require state consultation with the CFPA before any actions are filed. The CFPA would have its own broad enforcement authority, but it would be expected to consult with the federal banking agencies, as appropriate, before exercising that authority. The proposal provides for a back-up role for the banking agencies; notably, the proposal would not amend section 8 of the Federal Deposit Insurance Act, which is the source of their authority.

The proposed language also sets forth in detail the procedures for the CFPA, the transfer to the CFPA of authority and personnel from the federal banking agencies, and new data collection requirements.

Finally, yesterday's proposal includes a separate Title XI that would amend section 5 of the Federal Trade Commission Act, including the addition of a requirement that the FTC consult and coordinate with the CFPA and the federal banking agencies on unfair and deceptive practices in connection with the marketing or sale of a consumer financial product or service.

Not surprisingly, the White Paper section on consumer protection and yesterday's proposed language already have encountered fierce opposition from industry and trade groups. House Financial Services Committee Chairman Barney Frank has announced his support for the bill, but a lengthy battle in Congress appears likely.