President Proposes New Credit Safety Agency for Consumers

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President Proposes New Credit Safety Agency for Consumers

Consumer Organizations Urge Fast Action to Create Strong, Independent Regulator

WASHINGTON -

National consumer protection organizations applauded
President Obama’s proposal to create a new federal Consumer Financial
Protection Agency to ensure the safety, fairness and sustainability of
credit. The agency would have broad powers to ensure that credit and
payment products do not have predatory or deceptive features that can
harm consumers or lock them into unaffordable loans.

“The international economic crisis was triggered by the failure of
federal regulators to stop abusive lending, particularly in the housing
sector,” said Travis Plunkett, Legislative Director of the Consumer
Federation of America.   “If the President’s proposal had been in place
five years ago, this agency would have been able to better protect
consumers, financial institutions, and the entire economy.”

Currently, seven federal regulatory agencies are charged with
protecting consumers in the financial services marketplace.   Five of
these agencies also oversee the soundness of financial institutions.
The President’s proposal would consolidate most federal consumer
protection efforts into a single agency.

“Too often, captive federal banking regulators have treated consumer
protection as less important or even in conflict with their supposed
primary mission to ensure the safety and soundness of financial
institutions,”   said Ed Mierzwinski, Consumer Program Director of U.S.
PIRG.   “The President’s proposal would streamline and dramatically
improve the current splintered, ineffective federal financial
regulatory system because the new agency would be required to make
consumer credit protection its top priority.”

Under the President’s proposal, the new agency would oversee all
credit and payment products, no matter what kind of financial
institution offers them.   It would be charged with setting high
federal minimum standards, which would allow the states to impose
tougher requirements if warranted. 

“The days of allowing financial institutions to shop around for the
weakest form of regulation are over,” said Pamela Banks, Senior Policy
Counsel with Consumers Union.   “Under the President’s proposal, the
only regulatory competition that would exist would be to increase
consumer protections.”

The President’s proposal is very similar to legislation to establish
a Financial Products Safety Commission proposed by Senator Richard
Durbin and Representative William Delahunt (S. 566/ H.R. 1705).   Both
Senate Banking Committee Chairman Christopher Dodd and House Financial
Services Chairman Barney Frank have endorsed the concept as well.

"The economic crisis has caused a painful loss of confidence in
financial products and institutions. It appears that no one was minding
the store," said Linda Sherry of Consumer Action. "We support the
creation of a new agency with powers to cut through the web of
financial regulations and strengthen consumer protections. We need a
watchdog to restore consumer confidence and increase the availability
of innovative financial products to promote wealth building and access
to capital for all communities."

“We need to get back to old fashioned values like safe, affordable
products that the good old Main Street banker used to offer.  Consumers
should not have to fear that the fine print of their mortgage or credit
card is loaded with hidden tricks and traps that will explode on them,”
said Lauren K. Saunders, Managing Attorney of the National Consumer Law
Center.

Kathleen Keest of the Center for Responsible Lending said,   "This
plan represents a leap forward in addressing regulatory failures that
led to today’s financial crisis.  By having a strong agency with the
explicit mission of preventing abusive lending, we’ll ultimately build
a stronger economy and restore confidence in the credit markets."

“We urge Congress to act quickly on the President’s proposal so a
strong, independent agency is in place to protect consumers in the
financial services marketplace by next year,” said David Arkush,
Director of Public Citizen's Congress Watchdivision.

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Public Citizen is a national, nonprofit consumer advocacy organization founded in 1971 to represent consumer interests in Congress, the executive branch and the courts.

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