Tuesday, June 30, 2009

Obama admin. sets wide scope for consumer agency


Obama admin. sets wide scope for consumer agencyBy David Lawder
WASHINGTON (Reuters) - A new U.S. agency would have sweeping powers to write and enforce tough consumer protection rules for banks, mortgage lenders and other financial institutions under proposed legislation the Obama administration sent to Congress on Tuesday.
The legislative language fleshes out a key component of President Barack Obama`s plan outlined earlier this month to revamp U.S. financial regulation in response to the worst financial crisis since the Great Depression.
The proposed Consumer Financial Protection Agency aims to protect Americans from abusive practices employed during the recent housing and credit boom, such as deceptive and undocumented mortgage lending, poor loan disclosures, unfair interest rate increases and "fee traps" on credit cards.
The proposal would consolidate financial consumer protection power in a single new agency, stripping this authority from six current regulators, including the Federal Reserve and the Office of the Comptroller of the Currency.
"Consumer protection will have an independent seat at the table in our regulatory system. By consolidating accountability in one place, we will reduce gaps in federal supervision and enforcement," U.S. Treasury Secretary Timothy Geithner said in a statement.
A Treasury official said the agency will be focused primarily on credit products such as mortgages, credit cards and other consumer loans, savings products and payments services, such as electronic funds transfers.
Senate Banking Committee Chairman Christopher Dodd, who will play a key role in pushing regulatory changes through Congress, said the proposal would address "the colossal failures that led to the economic crisis."
"Creating an independent agency whose sole focus is protecting consumers -- be it credit card holders, anyone with a bank account, or families with mortgages or student loans -- is really the key to creating the foundations for a stronger economy," Dodd said.
But many Republicans and the financial services industry are less enthusiastic about the plan, which they fear would impose a regulatory burden that will add costs, reduce the availability of credit and stifle innovation.
They also fear that stripping existing agencies of their consumer authority could reduce their effectiveness.
"We completely agree with and applaud the emphasis the administration has placed on enhancing consumer protection. Our concern is that a new agency, by its very nature, might not effectively serve that objective," said John Dearie, executive vice president at the Financial Services Forum, a lobbying group that represents the largest U.S. financial institutions.
He said the proposed agency could "monopolize" the government`s approach to consumer protection by creating one agency with one staff and one institutional view.
However, the new agency would not affect the authority of the Securities and Exchange Commission or the Commodity Futures Trading Commission to adopt rules, initiate enforcement proceedings or take action against those they regulate.
Still, the powers the Obama administration wants to invest in the new agency are sweeping.  Continued...
Original article

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