WASHINGTON — Bank of America Corp. [BAC] is breaking ranks with other large banks and agreeing to support beefed up consumer-protection provisions in regulatory reform legislation, several sources said Wednesday.
The provision has been one of the most controversial elements in the reform effort, and the support of a large financial institution could help build momentum for the idea.
Until now, B of A has officially stayed neutral on a consumer protection unit but it has been fiercely opposed by the banking industry, which argues it could write rules that conflict with safety and soundness standards.
But at a meeting with several community groups on Wednesday, top B of A executives said they were ready to give a consumer protection agency their support under certain conditions.
They said the new agency should focus on regulating by product, not company type, and cover nonbanks and banks alike. Executives also emphasized that states should not be empowered to impose federal or state standards against national banks.
"We support the idea of a consumer protection entity, consistent with the principles of federal preemption, and believe that any new regulations should focus on activities that would apply evenly to all, rather than be focused on particular entities," a B of A spokesman said late Wednesday.
But the spokesman emphasized the company was not supporting a particular bill.
"We have not taken a position on any specific proposal or piece of legislation as there are many ways this might be achieved," he said.
Some community groups welcomed the bank's change of position.
"We are pleased to see Bank of America take this leadership position," said Janis Bowdler, a senior housing policy analyst with the National Council of La Raza. "We call on the bank's peers to follow in their footsteps and put the long-term stability of families and companies before short-term profits."
The move by B of A could provide momentum to Senate Banking Committee Chairman Chris Dodd's efforts to push his regulatory reform bill through the Senate this month.
But some consumer groups remained skeptical, noting the details for the planned Consumer Financial Protection Agency are still being hashed out by Dodd and the panel's ranking Republican, Sen. Richard Shelby of Alabama.
"The question is will they support the current Dodd CFPA or the rumored Shelby CFPA?" said Ed Mierzwinski, the consumer program director for the U.S. Public Interest Research Group.
Shelby has reportedly floated a proposal to Dodd to create a separate consumer agency that would be beholden to banking regulators' approval before issuing new consumer regulations.
The proposal is seen as a way to offer support for a separate agency without enabling it to override safety and soundness considerations of prudential regulators.
The current Dodd bill would create an independent consumer division within the Federal Reserve Board, but which would not be subject to the central bank's oversight. The division could only be overridden by a two-thirds vote of a proposed systemic risk council.
Some consumer groups saw B of A embracing consumer protection as trying to push Shelby's plan.
"My bet is if they do support it will be for the weaker Shelby CFPA with the bigger veto, and probably more preemption," said Mierzwinski. "One industry strategy is becoming clearer — they hope support for a sort-of CFPA will make it easier for them to demand concessions on derivatives and shadow banking and systemic risk regulation."