New watchdog? Bill proposes Consumer Financial Protection Agency.

• Author: Allen, Bruce C.
• Position: CapitolBeat

President Obama's plan to create the Consumer Financial Protection Agency was rolled out July 8 in HR 3126 (Rep. Barney Frank, D-Mass). The proposal is a massive overhaul, consolidation and centralization of federal regulatory powers under an agency run by presidential appointees, and assisted by a consumer advisory commission that will meet at least twice a year.

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HR 3126 is co-authored by 12 other House Democrats, including Brad Sherman, Jackie Speier, Maxine Waters and others representing California.

Of special concern to CPAs is the fact that individuals or organizations "acting as financial adviser to any person, including providing financial and other related advisory services, providing educational courses and instruction materials to consumers on individual financial management matters or providing credit counseling, tax planning or tax preparation services to any person," would be included in the regulatory scheme.

The Agency is to be funded by contribution and enforcement money received from regulated entities. The funding source implies that those that are regulated will have to register with the Agency so fees can be collected.

Broad Authority

One important provision of the bill is the authority to prohibit or impose conditions or limitations on the use of mandatory pre-dispute arbitration agreements. Attorneys and others who hold a fiduciary duty in connection with a trust arc exempted from the proposed law's provisions.

The Agency also will have broad regulatory and enforcement authority, including the power to require restitution; impose fines of$5,000, $25,000 or $1 million per day; and refer entities to the US. Attorney General for possible criminal prosecution.

Further, the Agency will have broad authority to exclude entities and individuals from its regulatory oversight.

As it is written, the bill would appear to include virtually every CPA under its purview, along with organizations such as CalCPA that promote financial literacy.

Cure for What Ails System?

Proponents of the bill argue that a single agency responsible for the entire financial services sector would deter companies from organizing and reorganizing themselves from thrifts to banks and mortgage companies--to evade what are perceived to be onerous regulations.

Service Employees International heralded the proposal and said, "Unfair financial (practices) are a big part of what caused the economic meltdown. And thanks to Wall Street's greed...