Rep. Miller Takes the Lead in Financial Regulatory Reform Negotiations

October 15, 2009

Washington, D.C. – Rep. Brad Miller (NC-D) and Rep. Dennis Moore (KS-D) filed an amendment to the Consumer Financial Protection Agency (CFPA) bill today designed to generate broader support among Democrats for the financial regulation reform bill proposed to crackdown on lending practices that led to the current economic crisis.

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The amendment allows banks with less than $10 billion in assets and credit unions with less than $1.5 billion in assets to be exempt from examination by a new CFPA agency in addition to federal bank regulators. The CFPA would remain the primary examiner for consumer protection rules for 150 banks with more than $10 billion in assets.

“Community banks and credit unions who were not the worst actors in bad lending practices have a valid argument that they could be overwhelmed by multiple federal agency examinations, virtually doubling their administrative burden,” said Rep. Miller. “Safeguards remain in place that would allow CFPA to take over enforcement if any bank, no matter what size, has repeat violations.”

The CFPA has been under fierce attack by some in the financial services industry, the U.S. Chamber of Commerce and a number of business groups. CFPA would be a centerpiece of financial market reform. It would improve the fractured oversight of the nation’s financial markets, in which at least 10 federal regulators have some responsibility for consumer financial protection, but none have oversight as their primary objective. In the absence of meaningful oversight, the number of deceptive and predatory consumer financial products has exploded, including unscrupulous subprime mortgages and abusive credit card practices.

A vote on both amendments could come in the House Financial Services Committee as early as Thursday.

Summary of the Miller/Moore Amendment below:

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Miller-Moore Examination and Enforcement Amendment to H.R. 3126

Small Banks, Thrifts and Credit Unions
(assets of < $10 billion (bank and thrift) or <$1.5 billion (credit unions)

1. Consumer Compliance Examinations.

· Prudential Regulator Role. Retains primary responsibility for routine and targeted consumer compliance examinations, setting scope, conducting the exams, issuing reports and ratings, and taking nonpublic supervisory actions against an institution for violations uncovered in the exam.

· CFPA Role

Ø Participation. CFPA may (at its discretion) send an examiner to participate in any consumer compliance exam, including setting scope and procedures and providing input on ratings.

Ø Examination Information. CFPA receives all prudential regulator consumer compliance exam reports, and may review all underlying documentation in the possession of the prudential regulator.

Ø Removal. CFPA has authority to remove prudential regulator as compliance examiner on an institution-by-institution basis if it determines the regulator has failed to adequately conduct consumer compliance examinations.

a. Heightened Examination Period Required: Prior to removing a prudential regulator as compliance examiner, CFPA must place the institution on a period of “heightened” examination, during which a CFPA examiner shall participate in all examinations. This period shall last at least 1 examination cycle.

b. Automatic Appeal. A CFPA action to remove a prudential regulator as compliance examiner is automatically appealed to the Treasury Secretary. Unless the Secretary affirmatively acts to reverse within 120 days, the removal is upheld.

2. Consumer Complaint Process

· CFPA has authority over, and will establish and maintain, consumer complaint process for all banks and non-banks.

· CFPA has independent authority to conduct separate special investigations and prosecute violations that are identified through the consumer complaint process.

3. Enforcement

* Prudential regulator retains primary enforcement authority for violations arising out of the examination process.

· CFPA can evaluate prudential regulator’s non-public actions and decide to take public enforcement actions (CFPA must first petition the prudential regulator for additional enforcement action and may act if prudential does not within a specified period of time).

· CFPA can also take enforcement actions arising out of the complaint process under #2 above.

Large Banks, Thrifts and Credit Unions
(assets of more than $10 billion/$100 million)

1. CFPA conducts consumer compliance examinations, but can delegate to primary supervisor

· CFPA and prudential regulators coordinate exams and disputes resolved through governing panels (same as 9/25 Discussion Draft).

· On a case-by-case basis, CFPA can delegate to a prudential supervisor the responsibility for conducting consumer compliance exams

o CFPA will include at least one examiner on these exams

2. CFPA has primary enforcement authority for violations of consumer banking laws and regulations issued by CFPA.

· Prudential supervisor has a back-up enforcement authority to prosecute violations if CFPA fails to act within 120 days of notice of a violation (same as 9/25 Discussion Draft).

Source: Rep. Brad Miller