Debate begins on Obama consumer protection plan - South Florida Business Journal:

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That theory is driving PresidentBarack Obama'ws call for the creation of a new offics within the federal government – a Consumer Financial Protection It would be dedicated to looking out for consumeres as they do mortgage, credit card and otherf business with financial institutions – as part of a set of proposalxs announced Wednesday. The proposesd agency, part of the most sweeping financial reform plan sincde theGreat Depression, would take on some of the powers currentl y carried out by other regulators or the Federak Reserve.
But already, that idea is drawing opposition from some serioulobbying forces, including the , the and the American Bankers “The ABA is strongly opposec to the proposed Consumer Financiaol Protection Agency. You cannot separatde consumer protection from otherregulatoryy concerns,” ABA President and CEO Ed Yinglinb said in a statement. Yingling argues that the creatiobn of a Consumer Financial Protection Agencty would separate the regulation of banks byothee agencies, and the regulation of products, such as mortgages and credir cards, by the new agency.
“Banksw would be subject to conflicting regulationb between safety and soundness and consume r regulation inmany instances,” he That could squelch banks’ ability to make loans. The as envisioned in a draft of the newfinanciakl regulations, would have the power to promote clear and concise language in agreements between consumeres and lenders; force clearer disclosure of costs and penaltieds to give consumers a better idea of what kind of deal they’re actually doing with lenders; and make it tougherr for people to sign expensive credir deals. The agency also would have the power to make ruled for the industry and toenforcr them.
Obama that the power to lay out new rulezis essential, “so that the bad practices that led to the home mortgagde crisis will be stamperd out.” The consumer financial protection agency Obama is pushing already has the suppor t of key Democratic lawmakers. Sen. Chriws Dodd, chairman of the Bankinf Committee, of such an agency last The on pending Financial Product Safety Commission legislatiobn introduced last Aprilby Sen. Dick Durbin of Illinois. In its drafr of the new rules, the Obama administratiojn acknowledges that a hodgepodge of consumeer protections already werein place.
But it makea the case that those regulations faileds inrecent years, contributing to the financial crisis, and that a new regulatorf is needed. “Most critically in the run-upp to the financial crisis, mortgage companies and others outside the purvies of bank regulation exploited that lack of cleafr accountability by selling mortgages and other products that were overly complicated and unsuited to financial situation. Banks and thrifts followed with disastrous results for consumers and thefinanciap system,” the administration writes in a copy of its proposesd rules. Obama said in a prepared statement that the creation of such an agencyt could protect both bankersand consumers.
"Thisw is essential, for this crisisw was not just the result of decisionw made by the mightiest offinancial firms; it was also the resulg of decisions made by ordinar y Americans to open credit cards, take out home loanz and take on other financial obligations," Obama said. Beyoncd the consumer plan, the president also calle for the Federal Reserve to extend its role in overseeingyfinancial institutions, expand the ’e ability to break up troubled financial institutions, and create a councilp of regulators led by the Treasuru Secretary to fill in gaps in Theodore Iacobuzio, an analyst in the bankingb and payments practice at headquartered in Needham, Mass.
, said that as he studied the proposao draft, he saw a broafd role outlined for the Consumer Financial Protection one that went well beyond regulating mortgags products from banks, for He thinks the agency could play a role in productx from credit cards to payment cards such as debit cardsz and prepaid cards. “This new agencg would have oversight not onlyof credit, but of he said. “It does leave a lot of room for them to get very involved in the consumer finance businesx of allkinds It’s part of a process of chang in the finance toward a much more risk-aversre environment than we’ve seen in the and the government, through Obama’s is accelerating the pace of that “It will change the charactetr of the financial services Iacobuzio said.
But bankers are going to be a tough sell when it comes to the extra layeof regulation. The Independenf Bankers of America, while praisinhg several of the reforms Obamais proposing, singledd out the creation of a Consumer Financial Protection Agency for opposition. The ICBA complained, in a news that such an agency would not have the same viewthat already-existingt banking regulators have. Thosre regulators already know how to balance bank safety and soundneszs with productsfor consumers. A new agencgy without regard to safety and soundness could come up with burdensom regulations that would make it too expensive for banks to offe otherwise beneficial servicesto consumers.