On June 30, 2009, the Obama Administration released a draft bill that would create the Consumer Financial Protection Agency (CFPA). The Consumer Financial Protection Agency Act of 2009 would establish the CFPA as an independent agency in the executive branch to regulate the provision of consumer financial products or services and enforce 16 enumerated consumer laws. The “enumerated consumer laws” are the Alternative Mortgage Transaction Parity, Community Reinvestment, Consumer Leasing, Electronic Funds Transfer, Equal Credit Opportunity, Fair Credit Billing, Fair Credit Reporting, Fair Debt Collection Practices, Federal Deposit Insurance, Gramm-Leach-Bliley, Home Mortgage Disclosure, Home Ownership and Equity Protection, Real Estate Settlement Procedures, S.A.F.E. Mortgage Licensing, Truth in Lending and Truth in Savings Acts.

The CFPA would have broad rulemaking, examination and enforcement authority, subject to “backstop” enforcement authority of other agencies. More specifically, the CFPA would be authorized to:

  • Take actions to prevent unfair, deceptive or abusive acts or practices in connection with consumer financial product or service transactions
  • Define unfair, deceptive or abusive acts or practices
  • Promulgate rules on disclosures and communications
  • Regulate sales practices
  • Adopt rules on offering “standard consumer financial products or services” (so-called “plain vanilla” products) with “alternative consumer financial products or services”
  • Establish duties of fair dealing for “covered persons” who communicate directly with consumers M
  • Prescribe rules regarding consumer access to information concerning products or services obtained
  • Prohibit or impose conditions or limitations on certain arbitration agreements between covered persons and consumers

The Act would preempt state laws only to the extent inconsistent with the Act. States laws that provide greater protection to consumers would not be preempted. The Act also preserves the enforcement powers of states and attempts to clarify state law preemption and visitorial standards as to national banks, federal savings associations and their subsidiaries.

Certain consumer financial protection functions of the Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation and Federal Trade Commission, among others, would be transferred to the CFPA. “Consumer financial protection functions” include research, rulemaking, issuance of orders or guidance, supervision, examination and enforcement activities, powers and duties relating to the provision of consumer financial products or services.

Most provisions would become effective on the “designated transfer date,” which would be established within 60 days after enactment. The date must be between 180 days and 24 months after enactment.

House Financial Services Committee Chairman Barney Frank has said that his committee will consider the legislation in July.

  • Margaret Stolar and


In response to industry questions regarding the sweep account disclosure requirements in the Federal Deposit Insurance Corporation’s (FDIC) final rule on Processing of Deposit Accounts in the Event of an Insured Depository Institution Failure, the FDIC has prepared a list of Frequently Asked Questions (FAQs). The final rule sets forth general principles for determining the value and nature of claims against a failed insured depository institution in the event of failure. See 74 Fed. Reg. 5797 (Feb. 2, 2009). The final rule also imposes new sweep account disclosure requirements, as explained below.

Because certain funds in “sweep accounts” will not be eligible for deposit insurance coverage and will not be “deposits” under the depositor preference statute, the final rule requires institutions to prominently disclose in writing to sweep account customers whether their swept funds are “deposits” (i) within sixty days after July 1, 2009 and no less than annually thereafter, (ii) in all new sweep account contracts and (iii) in renewals of existing sweep account contracts. If the funds are not “deposits,” the institution must further disclose the status such funds would have if the institution failed — for example, general creditor status or secured creditor status.

A sweep account covered by the final rule involves the prearranged transfer of funds from a deposit account to (i) an investment vehicle located outside the depository institution or (ii) another account or investment vehicle located within the depository institution.

The FAQs cover the following general categories of questions:

  • The types of sweep accounts covered by the disclosure requirements, as well as those that are excluded.
  • The type and nature of disclosures required by the rule.
  • The frequency of required sweep account disclosures.
  • The principles used by the FDIC to determine how swept funds will be treated in the event of failure.
  • The requirements for a properly structured repo sweep.

Contact us if you would like a copy of the FAQ or the final rule.

  • Judy Scheiderer