Democrats Win Battle, for now, On CFPA

Senate Democrats have defeated efforts by Republicans to curb the power and independence of a new consumer protection agency by a 61-38 vote. The defeat of an amendment offered by Sen. Richard Shelby, R-Ala., paves the way for creation of the Consumer Financial Protection Bureau which will be funded by and housed at the Federal Reserve Board. The CFPB will be totally independent of the central bank and free of the congressional appropriations process. In defeat, Sen. Shelby claimed the measure ushered through the Senate by Sen. Chris Dodd, D-Conn., would create an out-of-control agency with no accountability to Congress. Shelby offered a substitute amendment to create a consumer protection division at the Federal Deposit Insurance Corp. that would have consumer oversight of large non-bank mortgage originators. The FDIC unit also would have authority over other financial providers that repeatedly violate consumer protection laws. "This will give the FDIC board authority to clamp down on the worst offenders of our consumer protection laws without needlessly subjecting law-abiding business to expensive regulation," Shelby said. If the Shelby amendment had passed, it would have been a step "backwards," Dodd argued, claiming the new division could not prevent abuses by finance companies, payday lenders, check cashers, credit card companies, debt collectors and car dealers involved in the finance business. "It is a stimulus package for unscrupulous lenders," Dodd added.