Financial Reform Blocked in Senate...For Now

Though the U.S. Senate voted largely along party lines Monday to block moving forward with the debate on financial reform legislation, most experts think it’s only a matter of time until the proposal works its way onto the Senate floor.

In a vote to open debate on a financial reform package already approved by the House of Representatives, the final tally was 57-41 in favor of debate. But under Senate rules, sixty votes are needed to move forward to a debate on the floor. One Democrat, Sen. Ben Nelson (Neb.), joined the unified Republicans in blocking the bill from the floor.

Even though they voted against moving ahead Monday, some of the most powerful Senate Republicans — including Mitch McConnell (Ky.), Richard Shelby (Ala.) and Bob Corker (Tenn.) — all have softened their stance on the Senate version of the House legislation.

Shelby, the lead Republican on the Senate Banking Committee, said in a Washington Post article on Monday that he and Sen. Christopher J. Dodd (D-Conn.), committee chairman, are "conceptually very close" to a deal to move the bill forward, with only “language tightening” the difference between the two sides.

Forward movement on the legislation is expected sometime soon, even though Monday’s vote stalled the bill. Another vote could come as early as Tuesday if Shelby and Dodd reach an agreement.

The vote was held on the same day as the release of a Washington Post-ABC News poll showing that two-thirds of Americans supported stricter regulations on the way banks and other financial institutions conduct their business.

The legislation itself is still largely unchanged from when Dodd unveiled it in March. That means the legislation, as it stands, still has several negatives for the accounts receivable management industry.

“We’re already very heavily regulated through the FDCPA (Fair Debt Collection Practices Act) though the FTC, various state laws through the state attorneys general and even city laws as well as private rights of action,” said Roger Knauf executive director of debt buyers’ trade group DBA International. “We’re not opposed to regulation; we’re opposed to dual regulation. We’ll not only be regulated by the FTC, but also by the new superagency.”

The new “superagency” would be the Consumer Financial Protection Bureau (CFPB) to be housed within the Federal Reserve. It is a compromise solution after the idea of a standalone Consumer Financial Protection Agency (CFPA) was scuttled earlier this year.

The penalties and the reporting requirements as proposed by the Senate legislation are excessive and misguided, according to ARM experts.

“Our industry was not part of the meltdown, it’s part of the solution,” Knauf added. “We provide a secondary market for distressed assets, thereby creating liquidity. But we, auto dealers and medical providers who extend credit are all considered financial institutions under this bill.”

Adam Peterman, director of federal government affairs for ACA International, added that ACA, DBA International and other industry executives have spent a lot of time discussing the industry’s issues with Senators and feel there are some who understand and agree with some of the industry’s issues. ACA, DBA, the Commercial Law League of America (CLLA) and the National Association of Retail Collection Attorneys (NARCA) banded together recently to present a united front for the ARM industry in addressing regulation of collectors (“Accounts Receivables Management Industry Calls On Congress to Keep FTC As Exclusive Regulator,” March 19).

Knauf said the industry has a handful of amendments that will be offered when and if legislation moves forward on the Senate floor: