State AGs' powers could be limited by House amendment

Chris Rizo Dec. 9, 2009, 4:37pm

Melissa Bean (D-Ill.)

Lisa Madigan (D-Ill.)

WASHINGTON (Legal Newsline)-Powers of state attorneys general could be reduced under an amendment to legislation dealing with the proposed federal consumer protection agency.

The amendment by U.S. Rep. Melissa Bean, D-Ill., would limit the ability of state attorneys general from pursuing tougher consumer financial protection regulations than the federal government.

Bean's effort is opposed by Illinois Attorney General Lisa Madigan, a Democrat. Her spokeswoman, Robyn Ziegler, said Tuesday that the attorney general supports "strong state protections" for consumers.

The Bean amendment would give the Office of the Comptroller of the Currency and the Office of Thrift Supervision powers to preempt state consumer protection laws. The amendment also would make federal consumer protection statutes the ceiling for states.

Critics say the amendment would affect areas of state law that are not currently preempted, including the Equal Credit Opportunity Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act and the Real Estate Settlement Procedures Act.

The amendment has set the stage for a political fight between Bean, a moderate Democrat, and House Financial Services Committee Chairman Barney Frank, D-Mass., who introduced the legislation to create the U.S. Consumer Financial Protection Agency.

In a letter to congressional leaders this fall, 40 state attorneys general said the federal government should not preempt state laws aimed at protecting consumers from frauds and abuses, particularly in the enforcement of state banking and mortgage foreclosure laws, if lawmakers create the new agency.

"Rather than limiting the states' role in consumer financial protection, as some have advocated," the letter said, "we believe Congress should encourage an active and effective partnership between the states and federal financial regulatory agencies to the ultimate benefit of all consumers."

The states' legal officers say they should be able to enforce the proposed federal agency's regulations, allowing for a joint approach to protecting consumers. They also said they want to be able to enforce consumer protection laws for state- and federally-chartered financial institutions.

"Weakened consumer protections and limited enforcement authority already have damaged many consumers and the economy in general," the letter said. "Early state action can prevent a local problem from becoming a national one."

Creation of the consumer protection agency is a top domestic priority of the Obama administration. The overall proposal is outlined in H.R. 3126. A final vote on the plan is expected Friday.

The new consumer protection agency is opposed by, among other business groups, the American Bankers Association. On Tuesday, the U.S. Chamber of Commerce launched an advertising campaign against the proposed agency.

The Congressional Budget Office has estimated the House bill would increase federal budget deficits by $4.5 billion over 2010 to 2019 period.

From Legal Newsline: Reach staff reporter Chris Rizo at

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