Consumer protection bureau proposed at Treasury Department

Senate Banking Committee members are considering creating a new bureau for consumer financial protections within the Treasury Department instead of setting up a standalone agency as proposed by President Barack Obama.

The discussions are still highly fluid and subject to committee debate. The new proposal, discussed by Senate Banking Committee Chairman Chris Dodd (D-Conn.) and other panel members, would create a bureau instead of a standalone agency and would set up an appeals process for bank regulators to weigh in on the bureau’s rules and decisions, according to a summary of a proposal obtained by The Hill.

{mosads}It is not clear if the new proposal could gain bipartisan support. Republicans on the banking panel, including Sen. Bob Corker (R-Tenn.), who has been negotiating with Dodd, have raised objections about creating a consumer entity under the Treasury Department.

Republicans prefer placing consumer protection responsibilities with the prudential regulators responsible for the safety and soundness of banks.

Dodd is expected to unveil wide-ranging overhaul legislation as early as next week. The consumer protection debate has been the toughest aspect of congressional work on how to craft new regulations following the worst financial crisis since the Great Depression.

According to the proposal summary, the bureau would have a director appointed by the president, a dedicated budget and broad rule-writing power. The bureau would not have direct exam and enforcement authority over banks and credit unions with assets of $10 billion or less.

The bureau would, however, hold those powers for banks and credit unions with more than $10 billion in assets and all non-bank mortgage companies.

The bureau would represent a major change from legislation that passed the House in December that created a standalone Consumer Financial Protection Agency (CFPA) to regulate home loans, credit cards and other financial products.

Consumer advocates have strongly campaigned against positioning a new consumer protection entity under a bank regulator. They argue that would dilute the power of consumer protection laws and enforcement.