WASHINGTON (CN) - In what Democrats are hailing as a major breakthrough, the House Financial Services Committee voted 39-29 on Thursday to create a federal financial consumer watchdog agency that would regulate mortgages, credit cards, payday loans and other products.
"We haven't seen anything like this since the early '30s," Kansas Democrat Dennis Moore said after the House panel approved a bill to establish the Consumer Financial Protection Agency.
Ranking Member Spencer Bachus, (R-Ala.), called it a "very flawed piece of legislation."
The bill is an answer to calls by Democrats for enhanced regulatory measures after the recent economic crisis. The Obama administration has backed the new agency as a central part of its financial reform efforts.
"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," Obama said in a released statement.
Massachusetts Chairman Barney Frank called the bill "one of the most important pieces of consumer legislation."
The agency would have the authority to impose new rules on financial products such as mortgages, credit cards and payday loans, and could ban any practices it deems unfair or abusive. It would also have the power to punish any rule-breakers.
Idaho Democrat Walk Minnick and Mississippi Democrat Travis Childers broke ranks with their party to vote against the agency, while Mike Castle from Delaware was the lone Republican to vote for it.
Eighty percent of bank assets would be fully subject to the rules of the agency, because the bureau would only have jurisdiction over institutions with more than $10 million.
Many are questioning a potential role overlap between the new agency and the Federal Trade Commission, which largely regulates competition and oversees consumer protection.
Frank said that anything not covered by the new agency will continue to be covered by the FCC.
"We will continue to work closely with Congress to create, for the first time, a federal agency whose sole mission is to protect the financial interests of everyday Americans with clear rules of the road for financial products and sufficient authority and resources to enforce those rules across the entire market," Obama said.
Ranking Member Bachus' major complaint was that Frank had not allowed all the Republican amendments to be considered before a final vote was taken.
"This legislation to create a Consumer Financial Protection Agency represents the largest expansion of financial services regulation since 1933," he said. "It deserved ample time for members on both sides to consider impacts and alternatives."
Of the 30 amendments submitted by Republicans, eight were approved.
The committee has spent days marking up the bill and will vote later Thursday on another measure to implement the Credit Card Accountability, Responsibility, and Disclosure Act (CARD) in December - sooner than the planned vote in February 2010.
Once the CARD Act takes effect, promotional rates will last at least six months, cardholders will have 21 days to pay from the time their bills are issued, and customers will be notified 45 days before any change in terms.
Companies will also be required to post their contracts online for easy government regulation
The bill to create a new consumer-oriented agency is now up for debate on the House floor.
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