WASHINGTON — Senate Republicans on Tuesday circulated an alternative consumer protection proposal that would leave the responsibility to enforce consumer protection laws for banks and thrifts with existing regulators.
The proposal, which will be offered as an amendment to financial regulatory overhaul legislation, calls for the creation of a new division within the Federal Deposit Insurance Corp. to supervise and enforce consumer laws for some non-bank mortgage originators "and other financial services providers who have violated the consumer protection statutes," according to a summary. A White House-appointed director would oversee the new division, which would have to receive the approval of the FDIC's five-member board before issuing new rules or regulatory orders.
The FDIC would continue to have secondary authority to enforce the rules at banks and thrifts.
The proposal would also maintain federal pre-emption of state laws with regards to nationally chartered banks, a provision sought by the financial services industry and supported by federal banking regulators.
The creation of a new consumer financial protection agency is a central plank in the Obama administration's broader response to the recent financial crisis. The White House and Treasury Department have pushed the idea of an independent agency to centralize current consumer protection oversight, which is currently spread over a number of agencies that have come under fire for missteps over the last decade.
The GOP alternative is sponsored by Sen. Richard Shelby, R-Ala, and backed by Senate Minority Leader Mitch McConnell, R-Ky, among others. The new FDIC division would be required to set aside 2% of its budget to enforce consumer laws at banks and thrifts, as well as charge non-banks new fees to cover the cost of regulation.