House Democrats are attempting to tweak the proposed new federal
regulatory agency over consumer financial products, but their efforts
have yet to assuage lobbyists’ concerns.
The House Financial Services Committee passed an amendment on voice vote on Thursday that would scale back the agency’s examination powers over small banks and credit unions.
The panel will continue its markup of legislation on Tuesday.
The Miller-Moore amendment was in response to strong lobbying efforts by bank and credit union interests, which argue they were not primarily responsible for the financial crisis.
They praised the amendment, but are not planning to endorse the bill as it stands.
The legislation would create a new Consumer Financial Protection Agency (CFPA) with power over a wide range of products, including home loans, payday loans and credit cards. The proposal is a central plank in President Obama’s effort to revamp the financial regulatory system and has been strongly opposed by the financial industry and Republicans.
Dan Berger, executive vice president at the National Association of Federal Credit Unions (NAFCU), said the amendment was “a step in the right direction,” but that the association would like to a see a “full exemption from this costly and unnecessary regulatory burden.”
The Credit Union National Association (CUNA) criticized the effort for dividing the industry between big and small credit unions.
“We would be compelled to oppose legislation formulated on that basis,” said Dan Mica, CUNA’s president.
The Independent Community Bankers of America (ICBA) said it strongly supports the amendment: “It’s a big step forward,” said Steve Verdier, senior vice president at the Independent Community Bankers of America (ICBA).
But the association will continue to lobby on the legislation particularly on its power to set rules and regulations.
House Democrats will continue to try to alter the measure next week when they tackle the tough question of how to balance federal and state powers.
The issue is dividing Democrats. The Obama administration and congressional allies want to allow state officials to pursue stronger regulations than the federal minimum. Meanwhile, centrist Democrats and the financial industry are strongly in favor of the agency being able to pre-empt state and local regulations.
The battle will arise on at least two amendments. Reps. Mel Watt (D-N.C.) and Moore are searching for a middle ground on the issue of preemption, according to a draft copy of the amendment.
They support generally requiring national banks to comply with state laws, except in two cases. The amendment would allow federal preemption when a state law has a “discriminatory effect” on national banks compared with state-chartered banks. The amendment would also allow the Office of the Comptroller of the Currency to determine if a state law prevents or interferes with a national bank’s business.
Financial industry groups remain opposed, and said the amendment does little to ease their concerns.
“We believe this amendment would be a significant erosion of preemption as it now stands,” said Tracey Mills, spokeswoman for the Consumer Bankers Association.
Industry groups will also likely be thwarted when a stronger amendment in favor of pre-emption is withdrawn.
Rep. Melissa Bean (D-Ill.), a strong supporter of preemption, has an amendment that would preserve existing uniform standards for federal institutions. But a Democratic aide said Bean is planning to introduce and then withdraw the amendment with the understanding that Committee Chairman Rep. Barney Frank (D-Mass.) and others will continue to debate the issue before a full House vote.
Lobbyist will also be watching a House Agriculture Committee markup on Wednesday of legislation reining in the multi-trillion dollar market for financial derivatives, tools used to hedge risk in a variety of businesses. Frank’s panel passed legislation on Thursday restricting the market, but the Ag committee will also be marking up a measure because it retains authority over the Commodity Futures Trading Commission. The commission would gain new powers in the legislation under debate.