Debate begins on Obama consumer protection plan - Atlanta Business Chronicle:

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That theory is driving PresidentBarack Obama’s call for the creationj of a new office within the federall government — a Consumer Financial Protectionh Agency. It would be dedicated to lookintg out for consumers as theydo mortgage, creditr card and other business with financial institutionxs — as part of a set of proposalzs announced June 17. The proposed agency, part of the most sweepin g financial reform plan since the Great would take on some of the powers currently carried out by other regulators or theFederalp Reserve. But already, that idea is drawingv opposition from some seriouslobbying forces, includinbg the U.S.
Chamber of Commerce, the Financiak Services Roundtable and the American Bankers Association. “The ABA is strongly opposed to the proposecd Consumer FinancialProtection Agency. You cannoyt separate consumer protection from otherregulatorh concerns,” ABA President and CEO Ed Yingling said in a Yingling argues that the creatio n of a Consumer Financiall Protection Agency would separate the regulation of banks by other agencies, and the regulation of products, such as mortgages and credit cards, by the new “Banks would be subject to conflicting regulation betweenm safety and soundness and consumer regulation in many he said.
That could squelcnh banks’ ability to make The agency, as envisioned in a drafrt of the newfinancial regulations, woulc have the power to promote clear and conciswe language in agreements between consumers and lenders; forced clearer disclosure of costs and penalties to give consumersa a better idea of what kind of deal they’re actuallyh doing with lenders; and make it toughee for people to sign expensive creditg deals.
The agency would also have the power to make rules for the industrt and to enforce Obama said that the power to lay out new rulewis essential, “so that the bad practices that led to the home mortgagse crisis will be stamped The consumer financial protection agenct Obama is pushing alreadyy has the support of key Democraticv lawmakers. Sen. Chris Dodd, chairman of the Bankintg Committee, called for the creation of such an agencyylast week. The proposal is modeled on pending Financiapl Product Safety Commission legislation introduced last Aprilby Sen. Dick Durbi of Illinois.
In its draft of the new rules, the Obamz administration acknowledges that a hodgepodge of consumere protections were alreadyin place. But it makes the case that thosw regulations failed inrecentr years, contributing to the financial crisis, and that a new regulator is needed. “Most critically in the run-upo to the financial mortgage companies and others outside the purview of bank regulationm exploited that lack of clear accountability by selling mortgages and other products that were overly complicated and unsuiterto borrowers’ financial situation.
Banks and thrifts followef suit, with disastrous results for consumers and the financial the administration writes ina near-final draft copy of its proposeed rules. Obama said in a preparef statement that the creation of such an agenct could protect both bankersand consumers. “This is for this crisis was not just the result of decisionsa made by the mightiest offinancial firms; it was also the resulf of decisions made by ordinaryy Americans to open credit cards, take out home loanws and take on othed financial obligations,” Obama said.
Beyond the consumer the president also called for the Federal Reserve to extenx its role in overseeinbgfinancial institutions, expand the Federal Deposity Insurance Corporation’s ability to break up troubled financia l institutions, and create a council of regulators led by the Treasuruy Secretary to fill in gaps in Theodore Iacobuzio, an analyst in the banking and paymentas practice at TowerGroup, headquarterecd in Needham, Mass., said that as he studiec the proposal draft, he saw a broad role outlinedr for the Consumer Financial Protection Agency, one that went well beyone regulating mortgage products from for instance.
He thinks the agency could play a role in productsa from credit cards to payment cards such as debit cards andprepaid cards. “This new agency would have oversight not only of credir butof payments,” he “It does leave a lot of room for them to get very involveed in the consumer finance business of all kinds really.” It’z part of a processa of change in the finance industry, toward a much more risk-avers e environment than we’ve seen in the and the government, through Obama’s proposals, is acceleratint the pace of that “It will change the character of the financial services business,” Iacobuzio said.
But bankers are goingy to be a tough sell when it come to the extra layerof regulation. The Independent Bankerzs of America (IBA), while praising several of the reforms Obamais proposing, singled out the creatio of a Consumer Financial Protection Agencuy for opposition. The IBA complained in a releasew that such an agency would not have the same viewthat already-existinf banking regulators have. Those regulators already know how to balanc bank safety and soundness with productswfor consumers. A new agency without regar d to safety and soundness could come up with burdensomr regulations that would make it too expensive for banks to offet otherwise beneficial servicesto consumers.