Battle Brewing On Capitol Hill Over Obama's Proposed Consumer Protection Agency
6/18/2009
Source: Julie Satow, The Huffington Post

Consumer groups welcomed President Barack Obama's proposal to create a Consumer Financial Protection Agency as part of his sweeping overhaul of financial regulations on Wednesday. But they worried that the victory could be short lived as the powerful Wall Street lobbies prepare to go to battle to protect their own.

"The financial industry is sharpening its knives, and the question is, will Congress be able to withstand a sustained assault?" asked Travis Plunkett, the legislative director of the Consumer Federation of America.

In anticipation of the confrontation, a coalition of 200 consumer groups announced a day earlier the creation of Americans for Financial Reform, which will fortify their allies in Congress and will work to protect the president's proposal for the new consumer agency.

"The new coalition is what the broad public interest community needs to work together and win," said Ed Mierzwinski, consumer program director of US Public Interest Research Groups.

Consumer groups are applauding the proposed agency, which has been dubbed the CFPA, for strengthening consumer protections. "It is a game changer," said Mierzwinski, "It's the biggest thing since deposit insurance."

Supporters pointed out three key elements in the proposal that will protect consumers -- the stronger role of states in enforcing consumer protection laws, which banks have tended to disregard; the new oversight authority across all types of Wall Street financial products; and the elimination of the long-standing conflict between the needs of financial firms and consumers.

"This proposal provides strong federal oversight, but it also restores the ability of states to enforce strong consumer protection laws," said Kathleen Day, a spokeswoman for the Center for Responsible Lending. States have long been sidelined in the fight for consumer protections because many banks that sell financial products to consumers are federally chartered, and so are only subject to federal oversight.

"What happens currently is that regulators passed rules that said they were the only ones with regulatory oversight over certain banks, and so state laws were preempted," said Ira Rheingold, the executive director of the National Association of Consumer Advocates. "But now, the way we read this, the new consumer agency can declare a floor of basic consumer protection, but the states have to take that even further if they choose."