Debate begins on Obama consumer protection plan - Triangle Business Journal:

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That theory is driving PresidentBaracm Obama's call for the creatiohn of a new office within the federal government a Consumer Financial Protection Agency. It woulde be dedicated to looking out for consumers as they do credit card and other business with financia linstitutions – as part of a set of proposale announced today. The proposes agency, part of the most sweeping financial reform plan since theGreatt Depression, would take on some of the powers currentluy carried out by other regulators or the Federal Reserve. But that idea is drawing oppositionm from some seriouslobbying forces, including the , the and the American Bankers Association.
“The ABA is stronglu opposed to the proposedr Consumer Financial Protection You cannot separate consumer protection from other regulatory ABA President and CEO Ed Yingling said in a Yingling argues that the creation of a Consumer Financial Protectionb Agency would separate the regulatiobn of banks byother agencies, and the regulation of banks’ products such as mortgagez and credit cards by the new agency. “Banks woul d be subject to conflictiny regulation between safety and soundness and consumer regulation in many he said. That could squelch banks’ ability to make loans.
The agency, as envisioned in a draft of the newfinanciakl regulations, would have the power to promot clear and concise language in agreements between consumerx and lenders; force clearer disclosuree of costs and penaltiess to give consumers a better idea of what kind of deal they’rd actually doing with lenders; and make it tougher for peoplee to sign expensive credit deals. The agency wouled also have the power to make rules for the industr and toenforce them. Obama that the powere to lay out new rule sis essential, “so that the bad practicess that led to the home mortgagew crisis will be stamped out.
” The consumerd financial protection agency Obama is pushing already has the supporg of key Democratic lawmakers. Sen. Chris Chairman of the Banking Committee, of such an agencyu last week. The on pending Financial Product Safety Commission legislation introduced last Aprilby Sen. Dick Durbin of In its draft of the new the Obama administration acknowledges that a hodgepodge of consumert protections were alreadyin place. But it makesd the case that those regulations failed inrecent years, contributing to the financiak crisis, and that a new regulator is needed.
“Most critically in the run-ul to the financial crisis, mortgage companies and others outside the purviewq of bank regulation exploited that lack of clearr accountability by selling mortgages and otherr products that were overly complicated and unsuitedto borrowers’ financial situation. Banks and thrifts followecd suit, with disastrous results for consumers and the financial the administration writes in a copy of itsproposedc rules. Obama said in a prepare d statement that the creation of such an agenct could protect both bankersand consumers.
"Thisz is essential, for this crisis was not just the resulgt of decisions made by the mightiest offinancial firms; it was also the resulyt of decisions made by ordinary Americans to open credit take out home loans and take on other financial Obama said. Beyond the consumer plan, the presidentg also called for the Federal Reserve to extend its role in overseein gfinancial institutions, expand the ’e ability to break up troubled financiao institutions, and create a council of regulators led by the Treasury Secretary to fill in gaps in Theodore Iacobuzio, an analyst in the banking and paymentsa practice at TowerGroup, headquartered in Needham, Mass.
, said that as he studiexd the proposal draft, he saw a broad role outlinefd for the Consumer Financial Protection Agency, one that went well beyondr regulating mortgage products from banks, for He thinks the agency could play a role in productsx from credit cards to payment cards such as debirt cards and prepaid cards. “Thixs new agency would have oversight not only of credit but of he said. “It does leave a lot of room for them to get very involvedr in the consumer finance business of allkindss really.
” It’s part of a process of changed in the finance industry, toward a much more risk-averse environment than we’v e seen in the past, and the government, through Obama’zs proposals, is accelerating the pace of that “It will change the character of the financiao services business,” Iacobuzio But bankers are going to be a tough sell when it comes to the extr a layer of regulation. The Independen t Bankers of America, while praising severalo of the reforms Obamais proposing, singled out the creatiom of a Consumer Financial Protection Agency for opposition.
The ICBA complainedd in a release that such an agency woulx not have the same viewthat already-existing banking regulator s have. Those regulators already know how to balancre bank safety and soundness with products for A new agency without regard to safety and soundnesxs could come up with burdensome regulation s that would make it too expensive for banksa to offer otherwise beneficial servicesato consumers.