House committee votes to limit power of new Consumer Financial Protection Bureau

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The House Financial Services Committee voted to limit the power of the new Consumer Financial Protection Bureau as Republicans continued to fight against the centerpiece of last year’s Wall Street reform law.

Voting largely along party lines, the Republican-controlled committee approved three bills Friday aimed at reducing the agency’s authority as it prepares to begin operations in July. The Consumer Financial Protection Bureau will have the power to set and enforce rules on mortgages, credit cards and other consumer lending products, taking authority from the Federal Reserve and other regulators.

One bill would replace the powerful Senate-confirmed director position -- still without a nominee -- with a five-member bipartisan commission. Another makes it easier for a panel of financial regulators to reverse actions of the new agency, reducing the standard and lowering the required vote from two-thirds to a simple majority. The last bill would prevent the agency from using its new authority in July unless it is led by a Senate-confirmed director.

The bills are expected to be approved by the full House, but likely would die in the Democratic-controlled Senate. President Obama would veto the legislation even if it passed as the consumer agency is one of his administration’s major accomplishments.

Nearly all congressional Republicans and much of the financial industry opposed creation of the Consumer Financial Protection Bureau. The agency is being set up by Harvard Law professor Elizabeth Warren, who was appointed to special White House and Treasury positions out of fear Republicans would block her nomination as director.

Senate Republicans have promised to block any nominee unless major changes are made to the agency’s structure, along the lines of those approved by the House committee.

The Consumers Union decried Friday’s votes.

‘These bills put the CFPB on a short leash and will make it harder for this watchdog to protect consumers from hidden bank fees, shady loans, and other financial rip-offs,’ said Pamela Banks, senior policy counsel for Consumers Union. ‘Congress should be standing with consumers, not the big banks and Wall Street firms that caused our financial crisis.’

But House Financial Services Committee Chairman Spencer Bachus (R-Ala.) said the changes were needed to provide more accountability for the new agency.

“Despite the overheated rhetoric from opponents, none of these bills weakens consumer protection in any way, shape or form,’ said Bachus, who has been an outspoken opponent of the new agency. ‘In fact, these bills will help make sure the consumer protection rules issued by the CFPB are consistent, fair and do not endanger the safety and soundness of financial institutions.’

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-- Jim Puzzanghera