Insurers fearing the regulatory reach of a new consumer protection agency can breathe a sigh of relief.
The House Financial Services Committee has voted by a margin of 39 to 29 to create a Consumer Financial Protection Agency (CFPA)—albeit one with a narrowed regulatory scope. Passing by voice vote, an amendment offered by Reps. Gwen Moore (D.—Wis.) and Erik Paulsen, removed insurers from CFPA oversight.
Insurers weren’t the only industries slipping the noose as retailers, auto dealers, community banks and lawyers also scored exemptions.
Earlier in the week, the prospect of insurers coming under CFPA authority created a palpable sense of unease at annual conference of the American Council of Life Insurers. Speaking on a panel discussion about financial services regulation, Kenneth Cohen, SVP and general counsel for Springfield, Mass.-based Mass Mutual Life Insurance Co., said the narrow nature of the proposed CFPA’s concerned him. “This is the most radical of all proposals emanating from this administration,” he said.
Even with little bipartisan support, Cohen predicted the measure was more likely to become law than other attempts at revamping financial services regulation because the topic was more comprehensible to the layman than, say, derivatives or an optional federal charter. “This is going to be a tough battle,” he said. “This has resonance with the average voter.”
Karen Shaff EVP and general counsel Des Moines, Iowa-based Principal Financial Group, said even if the CFPA passes, many of the most burdensome requirements for insurers has been excised from the bill through amendments. For example, an Obama administration provision requiring financial services companies to offer standardized, "plain vanilla" products was deleted from the final bill by House Financial Services Committee Chairman Barney Frank (D.—Mass.).
Shaff said that during the debate over the legislation, Frank acknowledged the futility of trying to force business to sell products against their wishes. Years earlier, when a local ordinance forced bars in his district to offer food as well as drink, Frank recalled that recalcitrant bar owners merely placed a purely perfunctory jar of pickled eggs on the bar to comply with the law.
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