A proposed federal agency to protect consumers from the financial practices that contributed to today’s economic crisis should be approved by year’s end and ready for business by mid-2011, federal officials say.
Meanwhile, efforts to curb the reach of the proposed Consumer Financial Protection Agency are increasing as congressional hearings approach.
The agency, first proposed by President Barack Obama in June, would have broad powers to ensure credit and payment products are not predatory or infused with deceptive features that can harm consumers or lock them into unaffordable loans.
The U.S. Treasury earlier this month provided Congress with a 650-page outline of recommendations for the agency. Treasury officials are confident that, despite changes that likely will happen to the legislation, the agency will ultimately be approved before the year-end holidays.
“We are working with both the House Finance Services Committee and the Senate Banking Committee to achieve comprehensive financial regulatory reform legislation this year,” Treasury Deputy Secretary Neil Wolin said in an interview last week.
“It’s the overall failure of consumer protection we are looking to repair, where consumers were sold things they didn’t understand or couldn’t afford. Consumers should not be subordinated,” he said.
Bankers and others in the financial sector say they fear additional oversight would make it too costly to offer some financial programs that could ultimately benefit consumers.
“The CFPA won’t work because its basis is the idea that consumer protection can be separated from the oversight of the soundness of the financial institutions themselves,” said Odysseas Papadimitriou, chief executive of , which promotes consumer advocacy in the credit card industry.
On Friday, Senate banking chairman Chris Dodd, D-Conn., called for Americans to stand up for the proposed agency.
“It’s stunning to me that consumer protections have become the flashpoint on regulatory reform,” Dodd said. “How can a need so obvious be so controversial?”
With House committee hearings set to start Wednesday, consumer advocates are rallying to beat back challenges.
“Lobbyists are out in force trying to kill or cripple legislation that would level the playing field between the banking and finance industry and consumers,” said Travis Plunkett, legislative director for the Consumer Federation of America.
Some proposed changes include preventing the agency from overseeing car dealers and other retailers that finance auto sales. Another is to prevent the agency from regulating insurance sold in conjunction with loans.
House finance committee chairman Barney Frank recently pressed to scale back the agency, including a provision to eliminate the requirement for “plain vanilla” language in financial documents such as mortgages and credit cards.
Wolin said he’s optimistic the proposal will win.
“We’ve tried to make sure the prescription matched the diagnosis . . .,” he said.
David Migoya: 303-954-1506 or dmigoya@denverpost.com
