Financial Regulatory Reform: Consumer Financial Protection Proposals

David H. Carpenter
Legislative Attorney

Mark Jickling
Specialist in Financial Economics

In the wake of what many believe is the worst U.S. financial crisis since the Great Depression, the Obama Administration has proposed sweeping reforms of the financial services regulatory system, the broad outline of which has been encompassed in a nearly 90-page document called the Administration's White Paper (the White Paper). The White Paper seeks to meet five objectives: 

(1) "Promote robust supervision and regulation of financial firms"; 

(2) "Establish comprehensive supervision and regulation of financial markets"; 

(3) "Protect consumers and investors from financial abuse"; 

(4) "Improve tools for managing financial crises"; and 

(5) "Raise international regulatory standards and improve international cooperation." 

The Administration subsequently offered specific legislative proposals that would implement each of the five objectives of the White Paper, including the Consumer Financial Protection Agency Act of 2009 (the CFPA Act or the Act). The Act would establish a new executive agency, the Consumer Financial Protection Agency (the CFPA or the Agency), to protect consumers of financial products and services. On July 8, 2009, Representative Barney Frank, Chairman of the House Financial Services Committee, introduced similar legislation, H.R. 3126, which also is entitled the CFPA Act of 2009. H.R. 3126 was marked up and ordered to be reported by both the House Financial Services Committee and the House Energy and Commerce Committee. H.R. 3126 was incorporated as Title IV of H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, which passed the House by a vote of 223-202 on December 11, 2009. On May 20, 2010, the Senate also approved a comprehensive financial reform bill, S. 3217, the Restoring American Financial Stability Act of 2010 (RAFSA). (The Senate actually passed H.R. 4173 in lieu of S. 3217 for procedural purposes; however, this report will refer to the Senate-passed bill as S. 3217 in order to differentiate between the two bills.) Title X of RAFSA (the Consumer Financial Protection Act of 2010) would create a Bureau of Consumer Financial Protection within the Federal Reserve System, which would be provided similar authorities over consumer financial products and services as proposed for the CFPA by H.R. 4173, with some significant differences. 

This report provides a brief summary of the Administration's CFPA Act and delineates some of the substantive differences between it and H.R. 4173, Title IV, as it passed the House, and S. 3217, Title X, as it passed the Senate. It then analyzes some of the policy implications of the proposal, focusing on the separation of safety and soundness regulation from consumer protection, financial innovation, and the scope of regulation. The report then raises some questions regarding state law preemption, sources of funding, and rulemaking procedures that the Act does not fully answer.


Date of Report: May 26, 2010
Number of Pages: 18
Order Number: R40696
Price: $29.95

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.