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CFPA Bill Advances. But What Will Be Its Final Form?

Posted By Cliff Tuttle | October 23, 2009

Posted by Cliff Tuttle (c) 2009

Summary: The jurisdiction of the proposed Consumer Financial Protection Agency is being reduced as the bill for its creation works its way through Congress. The dilemmas created by dual regulation are driving this process.

The Consumer Financial Protection Agency Act has been reported out of committee in the House, but the likely impact of such a new federal agency is unknown. The bill was amended in committee to remove it as a regulator of community banks. Insurance companies are also exempt and there will probably be other reductions in its jurisdiction before final passage.

A separate regulator for financial institutions in the consumer protection arena appeared to make sense. Bank regulators give consumer protection a subordinate role to safety and soundness, as they probably should. But when the two missions come into conflict, the agencies have a problem. Splitting the functions between two separate regulators would seem to present the opportunity for a resolution.

On the other hand, multiple agencies sometimes fail to cooperate, putting the regulated institution in a no-win situation. This has happened when federal and state bank regulators have made conflicting findings in their examination reports on state chartered institutions. The opportunity for this dilemma to emerge is probably going to increase in areas where the CFPA’s jurisdiction overlaps that of other regulators.

So, what will be the impact of CFPA? Perhaps not much. Who will it ultimately regulate? Perhaps not many.



CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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