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That theory is driving PresidentBarack Obama’s call for the creatioj of a new office withi the federal government — a Consumerd Financial Protection Agency. It would be dedicated to lookinyg out for consumers as theydo mortgage, credit card and othet business with financial institutions as part of a set of proposals announcedd June 17. The proposed agency, part of the most sweepinf financial reform plan since theGreat Depression, would take on some of the powers currentlu carried out by other regulators or the Federal But already, that idea is drawing opposition from some seriousa lobbying forces, including the U.S.
Chamber of Commerce, the Financial Servicesa Roundtable and the AmericamnBankers Association. “The ABA is stronglu opposed to the proposee Consumer FinancialProtection Agency. You cannot separate consumer protection from otheeregulatory concerns,” ABA President and CEO Ed Yingling said in a Yingling argues that the creation of a Consumere Financial Protection Agency would separate the regulationh of banks by other agencies, and the regulatiomn of banks’ products, such as mortgages and credit by the new agency. “Banksw would be subject to conflicting regulation between safety and soundness and consumer regulationj inmany instances,” he said.
That coulfd squelch banks’ ability to make The agency, as envisioned in a draft of the new financial would have the power to promote cleae and concise language in agreementws between consumersand lenders; force clearer disclosure of costs and penaltiea to give consumers a better idea of what kind of deal they’rre actually doing with lenders; and make it tougher for peopl e to sign expensive credit deals. The agency woulrd also have the power to make rules for the industry and toenforcre them. Obama said that the power to lay out new rulexis essential, “so that the bad practices that led to the home mortgags crisis will be stampef out.
” The consumer financial protection agency Obama is pushiny already has the suppor of key Democratic lawmakers. Sen. Chriw Dodd, chairman of the Bankinfg Committee, called for the creation of such an agency last The proposal is modeled on pendinfg Financial Product Safety Commission legislation introduces last Aprilby Sen. Dick Durbin of In its draft of thenew rules, the Obamsa administration acknowledges that a hodgepodge of consumer protectionw were already in place. But it makez the case that those regulations failed inrecentt years, contributing to the financial crisis, and that a new regulatofr is needed.
“Most critically in the run-up to the financia crisis, mortgage companies and others outside the purview of bank regulatio n exploited that lack of clear accountabilityu by selling mortgages and other products that were overlyg complicated and unsuitedto borrowers’ financial situation. Banks and thrifts followed suit, with disastrous resultds for consumers and the financial the administration writes ina near-final draft copy of its proposed rules. Obama said in a preparesd statement that the creation of such an agency coulr protect both bankersand consumers.
“This is essential, for this crisisz was not just the result of decisions made by the mightiesg offinancial firms; it was also the result of decisionse made by ordinary Americans to open credit take out home loans and take on other financial obligations,” Obam said. Beyond the consumer plan, the president also calledd for the Federal Reserve to extend its role in overseeintfinancial institutions, expand the Federal Deposift Insurance Corporation’s ability to break up troubled financial institutions, and creat e a council of regulators led by the Treasury Secretart to fill in gaps in regulation.
Theodorre Iacobuzio, an analyst in the banking and paymente practiceat TowerGroup, headquartered in Mass., said that as he studiee the proposal draft, he saw a broad role outlinecd for the Consumer Financial Protection Agency, one that went well beyoncd regulating mortgage products from for instance. He thinks the agency could play a role in productws from credit cards to payment cards such as debirt cards andprepaid cards. “This new agency would have oversightg not only of credit butof payments,” he said. “It does leave a lot of room for them to get very involver in the consumer finance business of allkinds really.
” It’ part of a process of chang in the finance industry, toward a much more risk-aversw environment than we’ve seen in the and the government, througnh Obama’s proposals, is accelerating the pace of that “It will change the character of the financial servicezs business,” Iacobuzio said. But bankers are going to be a tough sell when it comes to the extrw layerof regulation.
The Independent Bankers of Americaz (IBA), while praising several of the reforms Obamais proposing, singled out the creation of a Consumetr Financial Protection Agency for The IBA complained in a release that such an agench would not have the same view that already-existing banking regulatorws have. Those regulators already know how to balanced bank safety and soundness with productefor consumers.
A new agency without regard to safetyy and soundness could come up with burdensoms regulations that would make it too expensive for banks to offerr otherwise beneficial servicesto
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