A new federal watchdog agency to consolidate and strengthen consumer financial protection took a major step forward yesterday when the House Financial Services Committee approved its creation on a 39-29 vote.

This is very good news for consumers.  The new agency would be a centerpiece of President Obama’s plan to beef up lax financial regulations and ensure that consumers are treated fairly. Its regulatory authority would include credit cards, mortgages, bank fees and other consumer financial products.  

The measure now goes to the full House, and it appears to have a healthy chance of gaining congressional approval before the end of the year. The bill has solid congressional support despite a deep-pocketed lobbying campaign being waged against it by the financial industry.

I strongly agree with the Obama Administration that this legislation should not diminish the states’ authority to enforce laws that protect consumers from financial fraud and abuse. I have joined with more than 30 state Attorneys General in a letter to House leaders urging rejection of efforts, led by large national banks, to preempt state enforcement and allow the banks to answer only to federal regulators. Reckless conduct by many of those banks contributed substantially to the nation’s recession. They would much prefer to be free of state oversight and be accountable to fewer “cops on the beat.”

As we state in our letter to Congress, consumer protection is a longstanding state responsibility, and our experience in investigating and prosecuting financial fraud runs deep. Our landmark predatory lending settlements against Household International, Ameriquest and Countrywide returned hundreds of millions of dollars to victimized borrowers and forced changes in lending practices at a time when federal protections were inefective. Allowing states to enforce federal standards will maximize government resources, promote honest competition and deter potential violators.

As approved by the House committee, the bill would give states the power to impose our own tough consumer protection laws against big financial institutions. It would exempt national banks from state laws only if those laws would “significantly interfere” with the banks’ ability to do business. Otherwise, banks would remain subject to state laws, which are often stronger than federal laws.

The Consumer Financial Protection Agency will strive to make sure that consumers get a fair shake in the marketplace. Congress needs to continue to resist intense lobbying efforts to weaken the bill, especially attempts to preempt state consumer protections. My Office and other states have put our legal skills and experience to work on behalf of consumers for many decades. We should be able to do an even better job once the new agency is up and running.

 

Terry Goddard