The Consumer Financial Protection Agency, which was signed into law Thursday, will not regulate annuities and life insurance.
House Financial Services Industry Committee members Congresswoman Gwen Moore (D. – Wisc.) and Congressman Erik Paulsen (R. – Minn.) successfully added language on Oct. 19 to the bill proposing the Consumer Financial Protection Agency that specifically removes annuities and life insurance from its oversight.
The Securities and Exchange Commission, FINRA and/or 50 state regulators, currently regulate annuities and life insurance, which is why “banks should breathe a sigh of relief,” says Kevin McKechnie, executive director of the American Bankers Insurance Association in Washington, D.C. “We already have an established compliance regime [for annuities and life insurance]. There’s no need to add another layer of regulation that would simply increase compliance costs that would ultimately affect consumer pricing.”
Cathy Weatherford, president of the Insured Retirement Institute, formerly the National Association of Variable Annuities, adds, “In this time of financial uncertainty, the industry needs to be nimble enough to respond to consumer demands by providing new, innovative products in a timely manner. If annuities had been included in the legislation, innovative products would be held up in even more bureaucratic red tape and not available to help those that need help the most.”
But for Susan Weinstock, director of the Consumer Federation of America’s financial reform campaign, the exemption of annuities and life insurance is just part of the process. “Any industry that could potentially be covered by the CFPA seems to want to get out from under it,” she says. The CFA is “thrilled” that the bill covers what it does—mortgages, credit cards and consumer loans, all of which are notorious for their squirrelly small print and hidden fees. In reality, insurance was never part of the deal. “Insurance wasn’t even part of President Obama’s proposal in June,” she says.
The upshot is that bank brokerage now looks to be off CFPA’s hook once and for all, as are credit-related insurance and auto financing, which dropped off the docket yesterday. “Every lobbyist is out in force saying, ‘Please exclude us,’” Weinstock says.
However, CFPA will regulate some services sold by banks on the loans side. While its bailiwick isn’t as broad as it might have been, “we’re thrilled with the passage of this agency,” Weinstock says. “We’ve done really well and the bill looks good.”