Compromising on State Preemption. While initial reports that federal preemption had been defeated put happy looks on the faces of consumer advocates and ambitious state attorneys general, a new compromise amendment attached to the bill served as something of a letdown. The compromise allows existing preemption rulings (which generally exempt banks from state law) to continue affecting any contracts that were signed prior to the date the law is signed. Going forward, banks will be able to apply to the Office of the Comptroller of Currency (the current national bank regulator, which will likely be replaced by a national bank supervisor or perhaps a "super-regulator") to be exempt from state-level rules on a case-by-case basis. The OCC will review that application in conjunction with the CFPA and can exempt the bank if it finds that the state rule interferes in "the business of banking" and can justify it in a public report.

"I think that provision, while a compromise, is a compromise that’s a clear win for consumer advocates," Miller said, noting that it is a return to a stronger standard that existed pre-2004, when Republicans fought for -- and won -- blanket preemption. Miller warns that protecting this compromise is a top priority, since the financial industry is likely to keep fighting. "Barney [Frank] said that he thought the effort to have the blanket pre-emption was dead; I think it’s perhaps not dead, maybe just mostly dead," Miller said. "If a bill became law resulted in the CFPA that could be captured by the industry, like every other kind of watchdog regulator has been captured in the last generation, and states were precluded from adopting and applying their own laws; it is very possible that consumers would actually be worse off."

Industry exemptions. "The only issue on which we clearly lost was the exemption of car loans by car dealers," Miller says. "It is not hard to imagine that there will quickly be a securitization market for car loans and that will be a gaping exception." There are also concerns that merchants that give loans could also act in a predatory manner, though it is hard to indicate in the case of merchants where regulation will begin or end. Rep. Henry Waxman, who chairs the Energy and Commerce Committee and shares jurisdiction with Frank's committee, has suggested that he will support changes to the bill as it moves to the floor in order to make sure that these holes are plugged. "The experience from the last decade or two, is that abusers migrate to the least regulated corners of the market," Miller points out.

Commission Instead of an Agency? There's also some internecine fighting going on between Frank and Waxman after the latter's committee passed an amendment changing the structure of the CFPA and making it into a CFPC -- a Consumer Financial Protection Commission, with a five-member board and Chairman running the show instead of a Director. Frank immediately issued a statement condemning this move, saying that “going from a single executive able to act promptly and efficiently to a five-member commission with staggered terms will weaken the capacity of the agency to provide consumer protection."

While I tend to side with Frank on this measure -- what's needed is one point of accountability that can take action -- Waxman isn't exactly known as an enemy of the common man, and his staff say the move is designed to provide long-term accountability and consistency so that when presidential administrations change, there has to be at least some consensus moving forward, pointing to the example of Republican appointees who haven't deigned to enforce certain rules. But it is a two-edged sword: At some agencies, the SEC in particular, gridlock among commissioners has prevented any action at all being taken. Staffers at Frank's Committee argue that the law is written in such a way that regulators who oppose the agency's mission would have very little discretion -- "We have taken out the guess work in this," one spokesperson said. The conflict will be resolved as the bill comes to the floor, either in the Rules Committee or in conversations between the committee chairs and the Democrat leadership.