WASHINGTON BUREAU — A House committee has voted to approve a Consumer Financial Protection Agency bill and to exempt insurance companies and products from CFPA oversight.
Members of the House Financial Services Committee today voted 39-29 to approve H.R. 3126, a bill introduced by House Financial Services Committee Chairman Barney Frank, D-Mass., that would create the CFPA.
Members agreed Wednesday by a voice vote to add the insurance exemption amendment, which was offered by Rep. Gwen Moore, D-Wis., and Rep. Erik Paulsen, R-Minn.
When the Obama administration proposed creation of the CFPA in August, it recommended that the CFPA have the ability to regulate some insurance products typically sold in connection with banking services, such as credit life insurance. Frank’s original H.R. 3126 draft also would have given the CFPA the authority to regulate credit insurance, title insurance and mortgage insurance products.
Moore and Paulsen introduced the insurance exemption amendment at the request of the Credit Union National Association Mutual Insurance Society, Madison, Wis., which is based in Moore’s district.
The approved amendment, which has several titles, declares that the “term ‘financial activity’ shall not include the business of insurance,” and includes reinsurance in the definition of the business of insurance.
The amendment also includes language barring the CFPA from interfering with state insurance regulators’ oversight of insurance companies and products.
The original version of the Moore insurance exemption amendment would have totally exempted credit insurance, title insurance and mortgage insurance products from CFPA oversight.
But, under pressure from the Treasury Department and consumer finance advocates, the amendment was modified to preserve the proposed agency’s ability to regulate unfair and deceptive practices used by individuals who are not regulated by state regulators, according to congressional staffers and industry officials.
Approval of the modified Moore amendment was welcomed by the American Council of Life Insurers, Washington, which has been working with CUNA Mutual to get the CFPA bill changed.
“We have always maintained that for the life insurance industry effective consumer protections require that solvency regulation and product design reside with the same regulator,” ACLI spokesman Whit Cornman says. “This amendment recognizes this need and of the protections that are already in place for life insurance consumers.”
The Insured Retirement Institute, Washington, an annuity industry trade group, also is praising the committee’s decision to approve the Moore amendment.
“By clarifying the definition of the ‘business of insurance,’ the committee made clear that life insurance and annuities will not be within the jurisdiction of the new agency, the IRI says.
The Consumer Federation of America, Washington, which says many banking-related insurance products have low loss ratios, is opposing efforts to limit the ability of the proposed CFPA to regulate those products.
“The CFPA should have full authority to stop the sale of credit-related insurance policies that are virtually worthless,” the CFA says.