WASHINGTON D.C. - The U.S. House of Representatives Committee on Financial Services recently held a hearing to review “Regulatory Restructuring: Enhancing Consumer Financial Products Regulation.” The committee, chaired by Rep. Barney Frank (D-Mass.) discussed whether the Consumer Financial Protection Agency (CFPA) would or would not regulate the insurance industry. As of now, the ASA says President Obama’s insurance reform proposal does not suggest whether or not to include insurance in the proposed CFPA. Insurance companies, which are currently regulated at the state level, are opposed to federal regulation of the industry. The administration’s proposal does not require the federal regulation of the insurance industry. The role, with regard to insurers, of the CFPA is unclear.
Witnesses at the hearing included:
• Rep. William D. Delahunt, D-Mass.
• Elizabeth Warren, Leo Gottlieb professor of law, Harvard University
• The Hon. William Francis Galvin, secretary of the Commonwealth of Massachusetts
• The Hon. Ellen Seidman, senior fellow, New America Foundation
• Edmund Mierzwinski, consumer program director, U.S. Public Interest Research Group
• Edward L. Yingling, president and chief executive officer, American Bankers Association
• Alex Pollock, resident fellow, American Enterprise Institute
• Travis Plunkett, legislative director, Consumer Federation of America
• Kathleen E. Keest, senior policy counsel, Center for Responsible Lending
• The Hon. Ralph Tyler, commissioner, Maryland Insurance Administration, on behalf of the National Association of Insurance Commissioners
• Gary E. Hughes, executive vice president and general counsel, American Council of Life Insurers • Catherine J. Weatherford, president and chief executive officer, NAVA, the Association for Insured Retirement Solutions
• Cliff F. Wilson, Southeast Arizona Insurance Services, on behalf of the National Association of Insurance and Financial Advisors
Plunkett stated the Consumer Financial Protection Agency would “protect consumers from unfair credit, payment and debt management products, no matter what company or bank sells them and no matter what agency may serve as the prudential regulator for that company or bank.”
Also in his testimony, Plunkett addressed the exclusion of insurance in the administration’s insurance reform proposal and recommended that the CFPA regulate the insurance industry as well. He said, “We would recommend that strong consideration be given to providing the agency with jurisdiction over insurance products that are central or ancillary to credit transactions, such as credit, title, mortgage and forced place insurance. This would provide the agency with holistic jurisdiction over the entire credit transaction, including ancillary services often sold with – or in connection with – the credit.”
“Additionally, there is ample evidence of significant consumer abuses in many of these lines of insurance, including low loss ratios, high markups, and ‘reverse competition’ where the insurer competes for the business of the lender, rather than of the insurance consumer. This federal jurisdiction could apply without interfering with the licensing and rate oversight role of the states.”
Tyler stated that the rights of states as the sole regulator of the insurance industry should remain. He said, “What the Congress should not do, in our view, is to empower that agency to wade into insurance, an area where strong consumer protections have long been a fundamental tenet of supervision and embedded in our regulatory and legal systems. It is the strong standards in the states that, in part, cause our critics to call for broader federal pre-emption. We do not need a competing federal regulator to feel the pressure from our industry and the Congress for sustained reform, but a competing regulator, no matter how innocuously envisioned, will ultimately erode a state system that is inherently centrist and undeniably effective.”
“Our system is not without its flaws and challenges. Congress has never shied away from pointing out where we can do better, and we welcome that scrutiny. If there are areas of insurance consumer protection that need improving, I would venture a guess that the states are aware of and working on those issues already. But stripping that fundamental authority from the states, or bifurcating it with a federal entity that inevitably will cause conflicts, confusion, and down the road, pre-emption, will do nothing to solve the problems exposed by our financial crisis.”
To see testimony from the hearing, visit ASA’s legislative Web site at www.TakingTheHill.com.
