Conferees Set to Debate Consumer Protections

Beginning at noon tomorrow, House and Senate conferees for the financial reform legislation will return to the negotiating table for round two – this time with their attention fixed on the contentious Title 10, which props up a new regulator for consumer financial protection.

In preparation for tomorrow’s proceedings, House Financial Services Chairman Barney Frank (D-MA) unveiled this afternoon the House’s proposals for amending the Senate language in regards to not only consumer financial protection, but also mortgage reform and predatory lending, and risk retention.

In a critical concession, Frank’s proposal would retain the Senate version’s placement of the newly-created Consumer Financial Protection Bureau (CFPB) inside the Federal Reserve, a move that is likely to provoke disapproval amongst Frank’s Democratic colleagues who favor the creation of a stand-alone agency. Even Frank, himself, panned the idea of housing a new consumer regulator inside the Fed when it was first proposed in the Senate in March. But once again, Frank’s concession largely reflects the political dynamics in the Senate, where the creation of a stand-alone agency would likely unravel a fragile coalition of 60 votes required for passage.

Striking another controversial note, Frank defied long-standing White House objections by reviving language included in the House-passed version and offered as amendment in the Senate by Sen. Sam Brownback (R-KS) – but which did not receive a vote -- that would exempt auto dealers from the CFPB’s regulatory oversight. It remains uncertain whether the White House will continue to lobby against the provision during negotiations this week.

The other hot issue in conference involves the interchange fees paid by retailers for the acceptance of debit card payments. Ever since the Senate’s passage of a controversial amendment offered by Sen. Richard Durbin (D-IL) that would allow the Fed to limit such interchange fees, a host of key industry groups – including the National Association of Federal Credit Unions and the Independent Community Bankers of America – waged a full-scale lobbying effort to strip the provision from conference. However, both Frank and Durbin forged an agreement that largely keeps the Senate language intact, although it provides an exemption for debt cards issued by local, state, and federal governments, and also allows the Fed to adjust fees if proved that such fees help fund fraud prevention efforts.

Stay tuned for updates throughout the week -- legislative details are expected to move fast and often.
 

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