Rep. Frank tweaks consumer financial agency legislation

Rep. Barney Frank (D-Mass.) on Tuesday circulated a memo to fellow Democrats that outlines strong support for a new Consumer Financial Protection Agency and includes a series of legislative changes designed to win over wary lawmakers.

Frank, chairman of the House Financial Services Committee, is a strong backer of President Barack Obama’s proposal for a new agency. It would have broad authority over products such as home loans and credit cards.

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“These changes are largely responding to member concerns,” said Steve Adamske, the committee’s spokesman. Frank, before the August recess, postponed a mark up hearing on the agency proposal amid broad opposition from Republicans and the financial industry, as well as concerns from fellow Democrats.

“What we’re going to accomplish now is refining the language,” Adamske said. “It was very broad from Treasury. We’re putting definitions on it. We’re putting some meat on the bones.”

Concerns began to mount that financial reform legislation was slipping down the list of priorities. Frank’s outline comes as administration officials make a strong push for lawmakers to pass new regulations before 2010. Treasury Secretary Timothy Geithner will testify before Frank’s committee on Wednesday morning on the need for those changes.

Frank is planning to hold a mark up hearing by mid-October on the CFPA proposal and on legislation regulating the market for derivatives.

Frank’s changes include a clarification that the agency would not regulate “nonfinancial businesses.”

The U.S. Chamber of Commerce is leading a coalition against the administration’s agency proposal with ads saying it would apply to butcher shops and bakeries that use credit systems. The proposal's supporters, including Frank, have said that is flat wrong, but they are now working to blunt criticism by clarifying the language.

Frank also wants to exempt from CFPA oversight several businesses acting in their "traditional capacities." Those businesses include accountants, real estate brokers, lawyers, auto dealers, and telecom, cable and other communication companies, among others.

Frank also opposes the administration’s original language that said the CFPA would have the power to require firms to offer “plain vanilla” products.

Under Frank’s proposal, the CFPA will be funded by the Federal Reserve at a level that, “reflects amounts the banking agencies currently pay for consumer compliance.”

Frank also intends that banking agencies and CFPA coordinated and consult on timing of examinations so as not minimize the regulatory burden.

Federal preemption of state banking regulations appears to be unresolved in the Frank memo. The administration said that the agency should not preempt state action, which would mean that state officials could pursue additional regulations. That worries financial lobbyists and centrist Democrats.