WASHINGTON — The Obama administration is actively discussing the creation of a regulatory commission that would have broad authority to protect consumers of financial products as varied as mortgages, credit cards and mutual funds, according to several sources familiar with the matter.
The proposed commission would be one of the administration’s most significant steps yet to overhaul the financial regulatory system. It would also be one of its first proposals to address causes of the financial crisis such as predatory mortgage lending practices.
Plans for the new body remain fluid, but it could be granted broad powers to make sure the terms and marketing of a wide range of loans and other financial products are in the interests of ordinary consumers, sources said.
Talks have begun with industry officials, lawmakers and other financial experts about the proposal, which would require legislation, sources said. Tuesday night, senior policymakers, including Treasury Secretary Timothy Geithner and National Economic Council director Lawrence Summers, were to discuss the idea at a dinner held at the Treasury Department.
Responsibility for regulation of consumer financial products is currently distributed among a patchwork of federal agencies. Some of these regulators regard consumer protection as a low priority. And some financial products are not regulated at all.
The proposal would centralize enforcement of existing laws and create a vehicle for imposing tougher rules.
The idea is likely to face significant opposition from industry groups, which argue that stricter regulation limits the availability of financial products to consumers.
It could also trigger a massive regulatory turf war. Agencies such as the Securities and Exchange Commission, which regulates mutual funds, and banking regulators could stand to lose powers, personnel and funding. Those agencies are likely to argue they are positioned to protect consumers because they oversee the financial firms directly.
The proposal is part of the administration’s broader plan to improve financial regulation.
