Draft language circulated by chairman Barney Frank clarifies what types of leases would fall under the Agency's jurisdiction.

The House Financial Services Committee will hold a hearing on the Obama administration's proposed Consumer Financial Protection Agency (CFPA). The witness list (see full list) includes Michael Calhoun, President and Chief Operating Officer of the Center for Responsible Lending.

Twenty one members of the Financial Services Committee are cosponsors of the Consumer Rental Purchase Agreement Act (see full list).

RTO Online (www.rtoonline.com) will carry video of the hearing live.

Would the CFPA do anything other than add another layer of bureaucracy and regulation on top of what already exists? That was the question put to George Mason University law professor Todd Zywicki in a recent interview with ReasonTV (see video at left).

"The agency is one of the centerpieces of the Obama regulatory reform act[s]," says Zywicki, "It goes far beyond how we've thought about consumer credit regulation for the past 30 or 40 years."

Committee chair Barney Frank (D-MA), circulated a discussion draft (see full text of draft) clarifying the types of leases considered "financial activity" and therefore under the jurisdiction of the proposed Agency.

The draft states that leasing personal or real property or acting as agent, broker, or adviser in leasing such property would be considered a financial activity, and therefore under the Agency's jurisdiction, only if all of the following criteria are met:

1. The lease is on a non-operating basis
2. The initial term of the lease is at least 90 days
3. In the case of leases involving real property, at the inception of the initial lease, the transaction is intended to result in ownership of the leased property to be transferred to the lessee, subject to standards prescribed by the Director.

Most rent-to-own agreements have an initial term of 30 days or less. The draft language would seem to exclude rental-purchase agreements from the Agency's jurisdiction. Payday lending however will almost certainly fall under the Agency's umbrella.

The American Financial Services Association (AFSA), a national trade association for the consumer credit industry, opposes the creation of the CFPA. Chris Stinebert, President and CEO of AFSA will testify at tomorrow's hearing. Stinebert said today, "AFSA remains opposed to the idea of creating a new federal regulator as a way to address the need for improved consumer protection for financial services customers. If the CFPA were to become a reality, financial services customers can expect less borrowing flexibility and higher prices – even with the elimination of the "plain vanilla" requirement."

The AFSA is urging members of Congress to consider alternate approaches that "...will truly benefit the consumer."

The full committee hearing - Perspectives on the Consumer Financial Protection Agency - is set for Wednesday, September 30 at 10:00 a.m. in Room 2128, Rayburn House Office Building.

As of today (Sep. 29), the witness list includes:

Panel one

- Hilary O. Shelton, Director, National Association for the Advancement of Colored People
- Michael Calhoun, President and Chief Operating Officer, Center for Responsible Lending
- David C. John, Senior Research Fellow, Thomas A. Roe Institute for Economic Policy Studies, The Heritage Foundation
- Janis Bowdler, Senior Policy Analyst, National Council of La Raza
- Possible additional witness may be announced

Panel two

- R. Michael S. Menzies, Sr., President and Chief Executive Officer, Easton Bank and Trust Co. on behalf of the Independent Community Bankers of America
- Andrew J. Pincus, Partner, Mayer Brown LLP on behalf of the U.S. Chamber of Commerce
- Edward L. Yingling, President and Chief Executive Officer, American Bankers Association
- Chris Steinbert, President and Chief Executive Officer, American Financial Services Association