Debate begins on Obama consumer protection plan - San Antonio Business Journal:

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That theory is driving PresidentBaraco Obama’s call for the creation of a new office withim the federal government — a Consumer Financiaol Protection Agency. It would be dedicated to lookinfg out for consumers as theydo mortgage, credit card and otherf business with financial institution — as part of a set of proposald announced June 17. The proposed agency, part of the most sweepingb financial reform plan since theGreat Depression, would take on some of the powera currently carried out by other regulators or the Federa Reserve. But already, that idea is drawing opposition from some seriousslobbying forces, including the U.S.
Chamber of Commerce, the Financiao Services Roundtable and the AmericajnBankers Association. “The ABA is strongly opposex to the proposed Consumet FinancialProtection Agency. You cannot separate consumedr protection from otherregulatory concerns,” ABA President and CEO Ed Yinglint said in a statement. Yinglintg argues that the creation of a Consumerd Financial Protection Agency would separate the regulation of banksd byother agencies, and the regulatioj of banks’ products, such as mortgages and credi cards, by the new agency. “Banks woul be subject to conflicting regulation between safety and soundness and consumer regulation inmany instances,” he said.
That coulrd squelch banks’ ability to make loans. The as envisioned in a draft of the newfinancialp regulations, would have the power to promotr clear and concise language in agreementss between consumers and lenders; force cleare disclosure of costs and penalties to give consumer a better idea of what kind of deal they’r e actually doing with lenders; and make it toughere for people to sign expensiv credit deals. The agency would also have the powe r to make rules for the industry and toenforcee them. Obama said that the power to lay out new rulesis essential, “so that the bad practices that led to the home mortgagee crisis will be stamped out.
” The consumer financial protectiohn agency Obama is pushing already has the supportg of key Democratic lawmakers. Sen. Chrisx Dodd, chairman of the Banking Committee, called for the creatiob of such an agency last The proposal is modeled on pendinb Financial Product Safety Commission legislation introduce last Aprilby Sen. Dick Durbin of Illinois. In its draff of the new rules, the Obam a administration acknowledges that a hodgepodge of consumer protections were alreaduin place. But it makez the case that thoser regulations failed inrecent years, contributinvg to the financial crisis, and that a new regulator is needed.
“Most critically in the run-ulp to the financial crisis, mortgage companies and otherds outside the purview of bank regulation exploite that lack of clear accountability by selliny mortgages and other products that were overly complicatedr and unsuitedto borrowers’ financial situation. Banks and thrift s followed suit, with disastrous results for consumers and the financial the administration writes ina near-final drafy copy of its proposed rules.
Obam a said in a prepared statement that the creatio of such an agency could protect both bankersand “This is essential, for this crisisw was not just the result of decisionx made by the mightiest of financial it was also the result of decisionds made by ordinary Americansa to open credit cards, take out home loands and take on other financial Obama said. Beyond the consumer plan, the presiden also called for the Federal Reservee to extend its role in overseeinffinancial institutions, expand the Federa l Deposit Insurance Corporation’s ability to break up troubled financialk institutions, and create a council of regulators led by the Treasuruy Secretary to fill in gaps in regulation.
Theodore an analyst in the bankingt and payments practiceat TowerGroup, headquartered in Mass., said that as he studied the proposao draft, he saw a broad role outlined for the Consumeer Financial Protection Agency, one that went well beyond regulatin mortgage products from for instance. He think s the agency could play a role in products from credig cards to payment cards such as debit cardss andprepaid cards. “This new agency would have oversightg not only of credit but of he said. “It does leave a lot of room for them to get very involved in the consumer finance busines s of allkinds really.
” It’s part of a process of chang in the finance toward a much more risk-averse environmenyt than we’ve seen in the and the government, through Obama’d proposals, is accelerating the pace of that change. “It will change the character of the financialservices business,” Iacobuzio said. But bankers are goinvg to be a tough sell when it come to the extra layerof regulation. The Independent Bankers of Americsa (IBA), while praising several of the reforms Obamazis proposing, singled out the creation of a Consumeer Financial Protection Agency for opposition.
The IBA complained in a releasee that such an agency would not have the same viewthat already-existinv banking regulators have. Those regulators already know how to balancwe bank safety and soundness with productsfor consumers. A new agency without regard to safety and soundness could come up with burdensom e regulations that would make it too expensive for banks to offert otherwise beneficial servicesto consumers.