The good news, of course, is that both the House and Senate passed Wall Street reform bills including a strong, new, independent consumer agency. The banks and the U.S. Chamber of Commerce tried hard to kill it; they lost.
The bad news is that now they are trying to weaken the proposed Consumer Financial Protection Bureau (CFPB). U.S. Public Interest Research Group and Americans for Financial Reform are fighting hard to protect the CFPB because it is in the public interest.
1) Will the final bill wrongly exempt car dealers? The House offer would exempt auto dealers from the new CFPB. The Senate bill is silent (although a non-binding resolution supporting the dealers passed the Senate). The exemption is opposed not only by Americans for Financial Reform but also by banks, credit unions, and the military, and by organizations that help military families in need (PDF). Auto financial scams impede U.S. troop readiness, and they harm families inside and outside of the military. Senate conferees should reject the auto dealer exemption.
2) Incredibly, will the final bill exempt attorneys? The House proposes to completely exempt lawyers, even though the base text already permits the CFPB to develop carefully crafted exemptions for attorneys on a case-by-case basis from specific rules. Recently, for example, Minnesota Attorney General Lori Swanson is one of many state attorneys general who have sued debt collectors fronted by law firms. Senate conferees should reject the proposed House attorney exemption.
3) Will the final bill impose burdensome and delaying rules supposedly to help small business that will harm consumers? The House offer eliminates the Senate's so-called Snowe-Pryor amendment, which would allow any business, not just small business, to slow CFPB rulemaking. Senate conferees should accept this House proposal.
4) Will the final bill allow the CFPB to examine and enforce its rules against the 98% of banks under $10 billion? Under the Senate bill, only the existing prudential bank regulators can enforce the CFPB's rules against these banks. Those are the same regulators that failed to protect us. The House offer adds back provisions from its bill that give the consumer agency backstop enforcement authority if the prudential regulator fails to act after a formal referral from the CFPB. Senate conferees should accept the House offer.
5) Will the final bill give CFPB full authority over all payday lenders, money remitters, check cashers and private student loan providers? These lenders compete with other types of lenders who are subject to federal supervisory oversight. The House language covers all such lenders equally, while the Senate language allows CFPB enforcement only for 'large' non-bank lenders. Senate conferees should accept the House offer.
6) Will the final bill modernize the Federal Trade Commission's regulatory process and enforcement powers? Many years ago, powerful special interests eliminated much of the FTC's authority to protect the public (PDF). The FTC's one-of-a-kind rule-making has been called "medieval" and "draconian" by its own chairman. Companies that break the law get a mulligan. They cannot be fined, unless they break the law again. Lawyers and accountants who aid and abet frauds and schemes cannot be held accountable. The FTC needs to be strengthened to fill in gaps where the CFPB won't get authority and to police the vast and growing Internet marketplace that will continue under its purview. This provision was in the House bill, but not the Senate bill, and industry is fighting hard to keep it out. Senate conferees should accept the House offer.
7) Will the final bill ensure that federal bank regulators cannot preempt state laws unless there is a substantive federal law to protect consumers? One of the leading causes of the financial meltdown was the elimination of stronger state laws by the federal Office of the Comptroller of the Currency (OCC), even when no federal law existed against the unfair practice. Federal regulators should not be able to take away state consumer laws and replace them with nothing. Senate conferees should accept the House offer that prohibits this.
8) Will the final bill immunize the CFPB from industry-backed budget riders? The Senate bill provides that the CFPB be funded by a guaranteed portion of the Federal Reserve's budget. The House provides that part of its funding instead be under the Appropriations process, which has long provided an opportunity for corporate mischief-making. Budget riders that limit what an agency can do with appropriated funds long prevented the Department of Interior, for example, from passing rules to protect ancient forests. Payday lenders should not be allowed to lobby Congress to restrict the CFPB. Worse, in the tough fiscal environment we are in, it is difficult for agencies to obtain adequate funding from appropriators. Senate conferees should reject the House offer to impose Appropriations rules on the CFPB.
9) Will the final bill reform the interchange fees banks charge merchants? Probably. For many merchants, their second or third highest cost is bank fees, with merchant interchange fees on debit and credit cards averaging nearly two cents out of every plastic dollar spent, resulting in higher prices for customers paying with plastic and for cash customers, too. The House offer includes a modified version of the Senate-passed Durbin amendment requiring that fees merchants pay to accept debit cards be reasonable and that the Visa and Mastercard networks be prohibited from rules banning merchants from telling consumers about payment alternatives that lower their costs. Greater transparency should result in any merchant savings being passed on to consumers.
10) Will the final bill include important mortgage reforms? Of course, all the mortgage companies and mortgage brokers and banks who had a role in the recent collapse of the world economy are saying "no." But if the best provisions of the House and Senate bills are included on mortgage reforms, homebuyers and homeowners will be in a better place.
Today's consumer votes are critical.
But, there's more to the conference. If you are trying to keep up with the conference, the House Financial Services committee has a summary here.
Still to come on this week's agenda is the critical battle on whether Congress will pass strong derivatives reform or whether it will capitulate to the financial interests whose casino betting in shadow markets led to the biggest economic collapse since 1929.
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