DATE: JULY 1, 2009

TO: NCOIL LEGISLATORS

FROM:SUSAN NOLAN

NCOIL EXECUTIVE DIRECTOR

RE: PRESIDENT OBAMA UNVEILS CONSUMER PROTECTION AGENCY BILL

The following information is provided for your review:

  • Consumer Agency Bill Exempts “Business of Insurance” (6/30 National Underwriter)
  • Administration Seeks Agency to Protect Consumers (6/30 Congressional Quarterly)
  • Administration’s Regulatory Reform Agenda Moves Forward (6/30 U.S. Dept. of Treasury)

Yesterday the President delivered to Congress draft legislation to create a Consumer Financial Protection Agency (CFPA). The 152-page bill draft would create the CFPA to, according to the U.S. Treasury Department, “protect consumers of credit, savings, payment and other consumer financial products and services, and to regulate all providers of such products and services.”

Both Senate Banking Committee Chairman Sen. Chris Dodd (D-CT) and House Financial Services Chairman Rep. Barney Frank (D-MA) have already expressed support for the CFPA concept and Chairman Frank has indicated his intent to mark up legislation in July.

CONSUMER FINANCIAL PROTECTION AGENCY

The draft legislation would, among many other things:

  • authorize the CFPA as an independent regulator with the power to
  • create consumer protection rules and enforce compliance
  • ban certain financial practices or products
  • create guidelines for simplified “plain vanilla” financial products
  • transfer the consumer protection responsibilities of other federal regulators—including the Federal Reserve, OCC, OTS, and FDIC, among others—to the CFPA
  • require the CFPA to continuously monitor the market for risks to consumers
  • require the CFPA to weigh costs (to industry) and benefits (to consumers) of regulations
  • preserve the authority of states to enforce consumer protection laws
  • clarify that CFPA judgments would form a regulatory floor and would not preempt stronger state consumer protection laws

The CFPA does not appear to have authority over insurance, but seems aimed towards credit-based and lending products. Specifically, in defining “financial activity,” the bill states “…the Agency shall not define engaging in the business of insurance as a financial activity (other than with respect to credit insurance, mortgage insurance, or title insurance, as described in this section).”

NCOIL ACTIVITY

NCOIL State-Federal Relations Committee Chair Rep. Greg Wren (AL) is sponsoring a proposed Resolution Favoring Continued State-Based Insurance Consumer Protection (available here) for consideration at next week’s NCOIL Summer Meeting. The resolution, among other things:

  • supports state insurance regulation
  • says that insurance consumer protection should remain with the states
  • declares that any new financial product safety commission “or similar new or existing federal agency” should not have direct or indirect jurisdiction over insurance products

Feel free to contact me by reply e-mail or at 518-687-0178 or Mike Humphreys at or at 202-220-3014 for more information.