On Friday, House Financial Services Committee Chairman Barney Frank (D-MA) circulated a new discussion draft of his proposed legislation to create the Consumer Financial Protection Agency (CFPA). He announced that the House Financial Services Committee will hold a hearing on Wednesday, September 30, to discuss the CFPA generally and the discussion draft specifically. The discussion draft reflects some significant changes from the initial draft legislation that Chairman Frank circulated in July. His proposed changes to the bill would, among other things:
- Clarify who would be regulated by the CFPA (only providers of consumer finance offerings, eliminating consumer reporting agencies, tax preparers, most insurers, realtors, and auto dealers, certain technology providers, transaction processors and other service providers, and merchants providing incidental credit to purchasers of goods and services, but adding debt settlement service providers),
- Enhance the registration, reporting and examination requirements applicable to covered persons who are not depository institutions or their related persons,
- Delete the requirement for financial service providers to offer a "standard" or “plain-vanilla” product offering,
- Delete the requirement that communications with consumers be “reasonable,”
- Require coordination of examinations between the CFPA and federal and state banking regulators and provide clearer mechanisms to resolve disagreements between regulators,
- Revise the sources of funding for the new agency to include both Federal Reserve funding and assessments on "covered persons" based on the "size and complexity" of the covered person's business and their compliance record, with specific limitations on assessment rates of depository institutions and the relative assessment rates for smaller and larger depository institutions and for nondepository institutions), and
- Revise the governance structure of the CFPA to include greater representation from the bank regulatory agencies.