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last updated on December 16, 2009

Consumer Financial Protection Agency

A new federal agency to oversee consumer financial product safety should not regulate insurance products and duplicate state consumer protections.

NAMIC OPPOSES the inclusion of property/casualty insurance from the jurisdiction of the proposed Consumer Financial Protection Agency (CFPA).

BACKGROUND

One of the key elements of the financial services regulatory reform effort has been to ensure that taxpayers and consumers will be protected from another economic crisis. Included in the comprehensive regulatory reform legislation have been proposals to create a new federal office to oversee all consumer protection with regard to consumer financial products and services.

Insurance differs greatly from other financial products and services and insurance consumer protections are regulated very strongly by the states. In addition, there have been no consumer protection problems with regard to the property/casualty industry during the current economic crisis. For these reasons, NAMIC believes the resources and efforts to protect consumers should be focused on those segments of the financial services industry that led to problems.

NAMIC is concerned that a new federal consumer protection office with jurisdiction over property/casualty insurance will lead to dual regulation between the federal government and the states. Further, conflict between safety and soundness rules and the new office’s consumer protection rules could occur.

Legislation creating an independent Consumer Financial Protection Agency was made part of the comprehensive regulatory reform legislation passed out of the House in December 2009. In part due to NAMIC’s efforts, all lines of property/casualty insurance were specifically excluded from the jurisdiction of the CFPA because of property/casualty insurers’ unique state-based regulatory regime and focus on policyholder protections.

On the other side of Capitol Hill, creation of the new consumer protection office was met with significant concern among senators from both parties. In an effort to create a bipartisan bill, Sen. Christopher Dodd, D-Conn., Chairman of the Senate Banking Committee, asked certain members of the committee to partner with senators of the opposite party to craft specific sections of the bill. Recognizing that consumer protections were the most contentious issue, Sen. Dodd partnered with Sen. Richard Shelby, R-Ala., Ranking Member of the committee, to debate options.

On February 26, 2010, Sen. Dodd began to circulate a new proposal that would create a consumer protection division within the Treasury Department rather than an independent agency. The proposed Bureau of Consumer Financial Protection would be given broad power to examine and enforce rules across financial services and products. However, this power would be significantly checked by the ability of a financial institution’s primary safety and soundness regulator to appeal any decisions the new bureau would make. In addition, the bureau would have to consult with these regulators before proposing or finalizing any rules.

The business of insurance is also specifically excluded from the jurisdiction of the proposed bureau. On March 22, 2010, this new office was included in comprehensive financial service regulatory reform legislation that passed out of the Senate Banking Committee and is now heading for the floor.

NAMIC continues to work closely with the administration and Congress to adequately address concerns over consumer protection while ensuring the property/casualty insurance industry is excluded from federal consumer protection regulation and the state-based regulatory system maintained.

CONTACT INFORMATION

For more information please contact Dylan Jones, senior affairs director, at (202) 628-1558 or djones@namic.org.

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Benjamin Franklin Public Policy Award

Every two years, NAMIC presents their coveted Benjamin Franklin Public Policy Award© to lawmakers who have supported a stronger insurance market at least 75 percent of the time. This is demonstrated based on their support of NAMIC's position on certain roll call votes taken, or being a principal player/sponsor on legislation affected the property/casualty insurance industry, during the previous Congress.