WASHINGTON (Legal Newsline) - A House committe has voted in favor of the proposed Consumer Financial Protection Agency, a new federal regulatory scheme that would also involve state attorneys general.
Twenty-one Democratic attorneys general and one Republican have supported legislation to create the agency, and the House Financial Services Committee voted 39-29 in favor of it Thursday.
"The Consumer Financial Protection Agency will prevent predatory lending practices and other abuses and will ensure that consumers get clear information they can understand about financial products like credit cards and mortgages," President Barack Obama said, according to a report in the Los Angeles Times.
"This bill has now passed a major hurdle, and this step sends an important signal to the American people that we will not stand by and allow big financial firms and their lobbyists to mobilize against change."
Rep. Barney Frank, D-Mass., introduced the legislation, H.R. 3126, in July.
"Any state attorney general may bring a civil action in the name of such state, as parens patriae on behalf of natural persons residing in such state, in any district court of the United States or state court having jurisdiction of the defendant, to secure monetary or equitable relief for violation of any provisions..." it says.
The attorneys general who signed their names to a letter of support are: Arizona's Terry Goddard, California's Jerry Brown, Connecticut's Richard Blumenthal, Hawaii's Mark Bennett (the lone Republican), Illinois' Lisa Madigan, Iowa's Tom Miller, Louisiana's Buddy Caldwell, Maine's Janet Mills, Massachusetts' Martha Coakley, Minnesota's Lori Swanson, Minnesota's Jim Hood, Missouri's Chris Koster, Montana's Steve Bullock, Nevada's Catherine Cortez Masto, New Jersey's Anne Milgram, New Mexico's Gary King, North Carolina's Roy Cooper, Ohio's Richard Cordray, Oklahoma's Drew Edmondson, Oregon's John Kroger, Tennessee's Robert Cooper, Vermont's William Sorrell and West Virginia's Darrell McGraw.
Guam Attorney General Alicia Limtiaco also joined in the letter.
Part of the Obama administration's plan for financial regulation reform calls for the creation of a Financial Consumer Coordinating Council that will "establish mechanisms for state attorneys general, consumer advocates and others to make recommendations to the Council on issues to be considered or gaps to be filled."
Obama's proposal noted that state attorneys general are currently left to "fill the gap" where mortgage companies not owned by banks fall.
Earlier this year, the U.S. Supreme Court ruled that state attorneys general did have the authority to sue national banks, and Bank of America's Countrywide Financial Corp. agreed to pay $8.4 billion in a multi-state settlement of predatory lending allegations.
In June, Washington Attorney General Rob McKenna said the federal government is "emulating" that Countrywide settlement.
Eight state attorneys general wrote Obama in June to advise him not to undercut their authority to litigate against the financial industry, adding that consumers will be harmed.
"We look forward to forging an alliance with a federal regulator that has the protection of consumers and the promotion of sound credit practices as its central agenda," the letter says.
"We appreciate the fact that this legislation recognizes the key role that state attorneys general serve in spotting new frauds and abuses, responding to citizen concerns and enforcing state laws."
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.