A major piece of the Obama administration's efforts to overhaul the financial industry is moving forward.
A key House panel approved a bill Thursday to set up a new agency to regulate consumer credit â€” everything from payday loans to debit cards.
But after intense lobbying from large banks, small banks and nearly every potential creditor in between, the proposal has taken a few hits since landing on Capitol Hill.
Originally it seemed that the proposed consumer financial protection agency would monitor everything from car loans to Starbucks cards. But that's no longer the case.
Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee, said the panel's work had sharpened the bill's focus.
"We received a draft from the administration that I believe had some ambiguity. It was always my conception that the function of this agency was to deal with lending activity," Frank said.
Lawmakers worked this week on defining what the agency covers and what it doesn't.
These kinds of credit will face scrutiny: payday loans, paycheck cashing, debit cards, overdraft protection and mortgages.
Providers would have to register with the new agency, pay its fees and fines, and face its regulators.
Not included are: auto dealers, retail stores, doctors, lawyers and anyone else who's not in the finance business but who might extend credit.
Conservative Democrats and Republicans tried to amend the bill to curb the proposed agency's powers.
"We are dealing with a brand new huge federal agency that has the power to ban products," Rep. Jeb Hensarling (R-TX) said. "Consumer financial products impact 10 to 15 percent of the economy, cause unemployment, cause credit to be restricted and cause credit to be more expensive."
GOP lawmakers aimed their amendments at preventing the new agency from setting limits on fees or interest rates. They also lobbied hard to make sure it wouldn't step on other financial regulators.
But Democrats said the agency must be equal to the other banking watchdogs to make a difference.
"We shouldn't be creating a second-class agency," Rep. Melvin Watt (D-NC) said, "because we are sending the exact wrong message to the American people: that they as consumers are less important than everything else we are doing here."
Watt helped craft one the bill's key compromises, which checks the ability of states to write stronger consumer rules than federal regulators.
There were other compromises: Financial services companies won't be forced to provide plain vanilla versions of their products for consumers to compare. Small banks and credit unions won a concession that leaves them subject to the agency's rules but not its inspectors.
Despite the compromises, Frank said Democrats got what they wanted â€” a standalone agency that takes full responsibility for protecting consumers.
"Given the process and what we were up against," Frank said, "I think it's a very significant advance. I will predict it will only get better from our standpoint going further."
Banks and financial firms plan to continue to battle against the plan. They say it will hamper their ability to come up with new products and will end up restricting credit for everyone. And this is just one of the overhaul efforts they are opposing.
Frank's committee recently approved new rules for regulating derivatives, and is moving on to a proposal to deal with financial firms considered "too big to fail."