Obama Administration Sends Consumer Financial Protection Agency Bill To Congress

(RTTNews) - The Obama Administration Tuesday unveiled a detailed legislative proposal to establish a new federal agency charged with regulating consumer financial products.

The agency would have primary responsibility for protecting consumers and ensuring transparency in financial services, regardless of the type or structure of the company offering the product.

Michael Barr, Assistant Secretary for Financial Institutions at the Treasury Department, outlined the proposed legislation.

"It would be able to look across the financial services marketplace so that similar consumer financial products are treated the same," he said. "It would be able to level the playing field with high standards for consumers so that we don't have the experience anymore that we had during the mortgage crisis of bad practices growing up in the less regulated, less supervised sector."

He added, "We won't have a situation in which credit unions and community banks wanting to offer a basic 30 year mortgage can't survive doing that because they're competing against a mortgage company offering a product that a consumer can't understand but seems a lot better than it is."

The goal would be to establish one set of rules and standards across the marketplace and prevent companies from choosing a regulator based on the level of supervision it provides, Barr said.

"The agency will be able to get to the roots of the mortgage crisis that we saw in the past," he said. "It will be able to go into examine, supervise previously unregulated parts of the sector."

He added, "This agency will be able to protect consumers from unfair practices in the credit card sector that we saw the President took such strong action this spring with the credit card reform bill."

This agency would provide consumers with a regulator that is "truly looking out for their interests," Barr said, providing real accountability for getting the job done.

Barr added that the agency could also ease regulations that sometimes overlap between federal agencies.

"The agency, because it doesn't divide up responsibility for consumer issues, can act faster and lighten regulatory burden where it's in the interest of consumers," he said.

He added, "Our view is this is going to be a good thing, not a bad thing, for most financial institutions. The Consumer Financial Protection Agency is going to be able to lighten the regulatory burden where it's too heavy and it's going to be able to apply uniform rules across the financial sector."

Community banks and credit unions have no interest in competing against unregulated players outside of the system of consumer protections.

The administration Tuesday sent to Congress a 150 page draft bill setting up the framework for the new agency, Barr said.

"Today, the important step we're taking is translating the report about a new foundation … into actual legislative text," he said. "This is a draft bill that we are sending up to the Hill today."

He added, "We're going to be working very closely with leadership on the Hill. …. It's our expectation that Congress will move quickly on this legislation."

The draft bill envisions a mix of industry fees and congressional appropriations to pay for the new measure, though Barr noted that there would likely be some opposition to the measure.

"I don't think it's a surprise that big banks and institutions that benefited from the status quo want to keep it that way," he said. "It's unacceptable to us."

He added, "It is a very hard argument for a big bank to make that the status quo on consumer protection was enough, that consumers were protected enough during the financial crisis. … I don't envy them."

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