Senate Gets Its Own Version of Financial Reform Bill

Senator Chris Dodd (D-Conn.) has introduced the Senate side version of financial reform legislation that would put control of much of the financial services industry, including mortgages and credit cards, under the control of a new, independent Consumer Financial Protection Financial Agency (CFPA).

The CFPA would also oversee the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA).

Dodd's proposal, which is nearly identical in terms of consumer-protection features in Democratic legislation that's pending before the House of Representatives, would create a strong, independent Consumer Financial Protection Agency to oversee the sale and use of most financial products, such as mortgages and credit cards.

According to published reports, Dodd hopes his committee, which has 13 Democrats and 10 Republicans, will begin writing a bill early next month. Dodd is Chairman of the Senate Banking Committee.

“This is another extension of ‘don’t let a good crisis go to waste,’” Dan North, chief economist at Euler Hermes, ACI a trade credit insurance firm, said of the 1100-plus page proposal.  “It will meet the same resistance as the House bill because it creates a whole new government agency. I don’t think any [of the existing federal regulators] are going to go away quietly.”

While the House bill and Senate measure are likely to have consumer support due to the protections built into the measures, the proposals face heavy opposition from the FDIC and other current financial regulators as well as from financial services industry groups.

“Enhanced consumer protection should fix what’s broken and not create another layer of federal bureaucracy that consumers will end up paying for,” the American Bankers Association says in its position statement on effective financial regulatory reform. “Improving the existing legal and regulatory structures – particularly by filling the gaps of regulation and supervision of non-bank financial providers – will be more successful, more quickly, than creating a separate consumer regulator.”