While the din of the health care debate continues to envelope Capitol Hill, another divisive White House-backed measure looming on the sidelines already has attracted dozens of deep pocketed players determined to strike it down.
A cadre of business and trade groups have joined forces to lobby against the Obama administration’s proposed Consumer Financial Protection Agency (CFPA), arguing that restrictions in the measure would handcuff Wall Street and be a serious blow to the nation’s economy.
The American Financial Services Association (AFSA), the main trade association for the nation’s consumer credit industry that is among those leading the charge, has been meeting regularly with about 30 other trade groups to map out a plan of attack.
“We’re not opposed to consumer protection … but we don’t think this gets us there,” AFSA Executive Vice President Bill Himpler said. “Existing regulations on the books, had they been enforced, would’ve taken care of a lot of the problems.”
Their efforts, coupled with a separate multimillion dollar public relations and advertising campaign against the CFPA launched last week by the U.S. Chamber of Commerce, is expected to catapult the issue onto the main legislation stage this autumn.
“The chamber supports strong consumer protection, but a massive new bureaucracy with sweeping powers that will deprive consumers of affordability and choice is not the answer,” said chamber Senior Vice President David Hirschmann.
The administration says its proposed agency would offer greater consumer protections for such financial products as mortgages, credit cards and loans by establishing simpler and more transparent rules and regulations.
The agency, if enacted by Congress, would consolidate many of the regulatory duties that are spread over several agencies, such as the Federal Reserve, the Office of Thrift Supervision, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.
President Obama has promised that the measure would include banning the most unfair practices by financial institutions, such as “those ridiculous contracts with pages of fine print that no one can figure out,” adding that “those things will be a thing of the past.”
But banks, credit card companies and other financial institutions argue that tighter controls and more regulations would stifle investments and innovation in the financial world and possibly slow down the flow of capital — a scenario blamed for the recent economic crisis.
Participants in the AFSA’s loose coalition have been independently lobbying lawmakers and the administration against the CFPA, and have encouraged their members to do the same.
Mr. Himpler said his organization is working “hand in glove” with the chamber on the matter, though he is keeping his coalition’s strategy and tactics close to the vest.
“We’re utilizing everything” possible, he said. “I’m not entirely comfortable laying out all the cards, but I can tell you we have a strong grass roots component that’s been active.”
Scott Talbott, a spokesman for the Financial Services Roundtable, a coalition member, said a broad ad campaign could be one approach.
“We haven’t started yet but it’s still on the table,” he said.
In the meantime, Mr. Talbott said the round table, which represents some of the nation’s biggest financial services firms, is meeting with “relevant policymakers” to impress their concerns about the CFPA.
But he added that the financial industry must be careful to make it clear it is opposed to the regulations in the measure — not consumer protections in general.
“If you argue against the CFPA then someone could incorrectly say you’re against protecting consumers, and nothing could be farther from the truth,” Mr. Talbott said. “The fate of the consumer and the fate of the financial institutions are inextricably linked.”
Opponents say what is particularly troubling is the legislative scoop of the measure is so broad that potentially any retailer that accepts credit and debit cards potentially could be affected.
Restricting the free flow of credit would do catastrophic harm to the automobile industry, said Bailey Wood, a spokesman for the National Automobile Dealers Association (NADA).
“If credit is curtailed and certain people can’t get loans, it will put a cap on the number of new cars sold every year, and could potentially injure the people who the agency is trying to help — the consumer,” he said.
Mr. Wood added that the automotive financing sector, which typically relies on relatively simple fixed-rates, would be unfairly lumped in with the credit card and mortgage industries if the administration’s proposed regulations in the CFPA are adopted.
“Automotive financing had nothing to do with the economic downturn and the sub-prime crisis and the problem in the mortgage market,” he said.
The NADA is running advertisement this week in the political publications Congress Daily and Politico opposing the CFPA. And the group’s members, who are in Washington this week for their annual conference, plan to descend on Capitol Hill Wednesday to tell lawmakers in person how much they hate the plan.
The president has urged Congress to pass legislation to create the agency this year, and on Monday he pled his case in the nation’s financial epicenter — New York.
House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, has pledged that his panel soon would hold a vote on the proposal, calling it one of his panel’s highest priorities. Senate Banking, Housing and Urban Affairs Committee Chairman Christopher J. Dodd, Connecticut Democrat, also expected to pass the measure this year.
Debate on the CFPA could be pushed off the legislative calendar for awhile, however, as Capitol Hill lawmakers dig in for a protracted fight on health care reform.