WASHINGTON A U.S. House of Representatives panel approved a bill on Thursday to create a Consumer Financial Protection Agency to oversee mortgages and other financial products while strengthening the pro-consumer Federal Trade Commission.
The House Energy and Commerce Committee voted 33 to 19 to create the new consumer agency. The House Financial Services Committee passed a similar measure last week, with expectation of a full House vote next month.
Lawmakers on the House Energy and Commerce Committee voted to make two major changes to the agency. First, it changed its structure to a five-member commission, with a limit of three commissioners from any particular political party. This would give the new agency the same structure as the Federal Trade Commission or Federal Communications Commission.
Rep. Barney Frank reacted immediately to this move. "Going from a single executive able to act promptly and efficiently to a five-member commission with staggered terms will weaken the capacity of the agency to provide consumer protection," he said in a statement.
In committee debate on Thursday, Rep. Joe Barton, who opposes the bill, said the creation of a new agency was nothing more than "shuffling the deck chairs" and would do little or nothing to stop criminals whose goal is to perpetrate fraud.
Rep. John Dingell praised the bill as "a powerful and necessary tool" to protect consumers.
Lawmakers have said an independent agency needed to be created because bank regulators have done a poor job protecting consumers from risky financial products, such as the subprime loans that were a major factor in the financial crisis.
The House bill does not go as far as the administration's original proposal because it exempts many businesses, either in full or in part, including auto dealers, credit, mortgage and title insurers, banks with less than $10 billion in assets, and credit unions with less than $1.5 billion in assets.
Rep. Henry Waxman noted these exceptions in his opening remarks, saying, "I am concerned that too many exemptions and exclusions were put into the bill."
Waxman said he would not seek to change those exceptions at the markup, but added: "I will want to examine them closely as we move toward consideration on the floor."
Frank, chairman of the House Financial Services committee, has also said he will seek modifications to the exemptions during the floor debate, especially the one for auto dealers.
Business groups in particular oppose a portion of the amendment approved on Thursday that would allow the FTC to pursue a possible violation of the law at the same time that the new agency would do so.
The original bill had required the FTC to recommend that the new agency act, but the FTC was not allowed to move unless the CFPA failed to act within 120 days.
"While this (creation of the new agency) has been touted as a consolidation, it's really about duplication," said Ryan McKee, senior director for the Chamber of Commerce's Center for Capital Markets, who noted that both agencies could potentially investigate the same issue.
The bill itself includes a measure to make it easier for the FTC to enact rules, overturning a law passed in the 1970s. Amendments to cut this from the bill were defeated.
FTC Chairman Jon Leibowitz said the agency was happy with the vote. "I think we worked really hard to make sure people know what we're doing," he said.
(Reporting by Diane Bartz; Editing by Toni Reinhold)