Washington — A federal agency to regulate home loans, credit cards, savings accounts and other financial services won the approval of a House committee on Thursday despite complaints from banks and businesses.
President Barack Obama, who had proposed the agency to Congress, applauded the 39-29 vote, which fell mostly along party lines.
This step “sends an important signal to the American people that we will not stand by and allow big financial firms and their lobbyists to mobilize against change,” Obama said in a statement.
The House Financial Services Committee also approved by voice vote legislation that would impose new rules for credit cards by Dec. 1, moving up the date from mid-February. Democrats said changing the date was necessary because lenders were using the grace period to hike interest rates.
The proposed Consumer Financial Protection Agency is a cornerstone to Obama’s broader plan to clamp down on Wall Street and prevent much of the reckless lending that contributed to last year’s near-collapse of the market.
But the agency also has been the administration’s toughest sell to lawmakers worried that the regulation would strain neighborhood banks and small businesses.
Two Democrats — Travis Childers of Mississippi and Walt Minnick of Idaho — said they voted against the measure because they were afraid the bill would hurt businesses in their districts. Rep. Mike Castle of Delaware was the sole Republican voting for it.
As business lobbyists pressed to scale back the legislation and won several concessions, Treasury Secretary Timothy Geithner and other senior administration officials appealed to lawmakers not to weaken the bill.
In the end, the bill exempted general retailers, auto dealers, title insurers, accountants, lawyers and others. Lawmakers said that businesses would face scrutiny only if they offer financial services, but that the agency would not monitor every financial transaction, including store layaway plans.
Also under the bill, all but the biggest banks were spared from routine agency inspections and no businesses were required to offer standard, government-approved financial services, as Obama had wanted.
In addition, banks would be allowed to seek exemptions from state laws on consumer protection.
“Everyone told me that the banks always win. Quit now because they always win,” said Elizabeth Warren, who heads an independent panel that monitors the government’s bank bailout program and initially proposed the concept of a consumer protection agency. “They didn’t win today.”
The American Bankers Association said it would continue to try to make its case against the agency as the legislation moves to the House floor in coming weeks and, eventually, to the Senate.
“We still have major concerns with some principal areas” including “the very broad, ill-defined authority that is granted to this new agency,” said Floyd Stoner, ABA vice president for congressional relations.
Administration officials said they expected a tougher fight in the Senate, where procedural rules will give Republicans more of an opportunity to influence the bill.