ARM Firms to Get New Regulator Under Treasury Proposal Issued this Week

Calls to transfer the administration of the Fair Debt Collections Practices Act (FDCPA) to another federal regulator intensified this week when the Obama administration, through the U.S. Treasury Department, on Tuesday unveiled its plan to create an independent consumer protection agency.

The Consumer Financial Protection Agency Act of 2009 would give the new agency the authority to oversee all consumer protection laws and write new rules to protect consumers against deceptive and unfair practices. The act specifically defines the FDCPA as an existing law that would fall under the purview of the new agency. Furthermore, it proposes to amend the FDCPA to replace current regulator the Federal Trade Commission with the new agency in most language.

The proposal confirms speculation last week that the debt collection law would fall under the authority of the new agency ("Proposed Consumer Financial Protection Agency May Oversee FDCPA Enforcement," June 25).

"This agency will have only one mission – to protect consumers – and have the authority and accountability to make sure that consumer-protection regulations are written fairly and enforced vigorous,” Treasury Secretary Timothy Geithner  said when he unveiled the legislation.

Sen. Christopher Dodd, chairman of the Senate Committee on Banking, Housing, and Urban Affairs, immediately praised the legislation saying, “the Administration is addressing the colossal failures that led to the economic crisis with a bold and aggressive plan. Creating an independent agency whose sole focus is protecting consumers – be it credit card holders, anyone with a bank account, or families with mortgages or student loans – is really the key to creating the foundations for a stronger economy.”

The Federal Trade Commission (FTC), however, which currently regulates FDCPA, doesn’t appear ready to relinquish oversight of the debt collection law.  In a report last February, the commission requested that Congress to give it the authority to make and implement FDCPA rules.

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Kathleen Day, spokeswoman for the Center for Responsible Lending, a non-partisan, non-profit research and policy group, said she doesn’t expect the FTC or any agency overseeing consumer protection laws to abdicate their authority easily.

“A lot of agencies will fight,” to retain their authority, she said. “That’s what happens when changes comes in Washington.”

But Day said she believes there’s a lot of momentum on Capitol Hill to make the agency a reality.
 
“This (economic bailout) is a big crisis and taxpayers are really mad.  Regulators abdicated their role in protecting consumers to the banks.  You can’t have safety and soundness if you abuse the consumer,” she said.

Legislation to create an independent body to look out for consumer interest was first introduced last March by Democrat Rep. William Delahunt of Massachusetts.  Last week Delahunt reiterated his support along with others during a hearing on enhancing financial products regulation before the House Committee on Financial Services. Likewise, Committee Chairman Rep. Barney Frank said he wants the committee to pass legislation to create the agency by the end of July and hopes that a bill addressing the panel and other parts of the President’s financial regulatory plan will clear Congress this fall.

^pullquoteToo much regulation in an already heavily regulated industry will result in lost jobs and the states will lose a tax base. — Stacey Schacter, DBA International Board memberpullquote^

Under the Treasury Department’s proposal, in addition to overseeing the FDCPA, the Consumer Financial Protection Agency would regulate the Alternative Mortgage Transaction Parity Act; the Community Reinvestment Act; the Consumer Leasing Act; the Electronic Funds Transfer Act; the Equal Credit Opportunity Act; the Fair Credit Billing Act; the Fair Credit Reporting Act; the Gramm-Leach-Bliley Act, and several other consumer protection laws.