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Mounting Opposition to Obama’s Consumer Finance Regulator

It was already discussed in our previous two posts, “Fed Tasked to Oversee Systematic Risks in the Financial Industry” and “Arguments over the Fed’s Additional Powers” that there were a lot of oppositions to Obama’s consumer finance regulation plans. However, it seems that it wasn’t the end of the story. Faced with massive opposition already, the proposal to bring all consumer financial-related products under one regulator became further unpopular.

Aside from the frown it received from Congress, the nation’s biggest banks are also lobbying to hinder the Consumer Financial Protection Agency (CFPA) from being created. And if this agency is established, then the financial industry wants its sweeping powers removed. Some of their most notable concerns include the regulator’s ability to force banks and brokers to offer simplified credit cards, mortgages, and exotic products.

Contrary to certain perceptions though, Obama’s proposal does not include setting prices on these financial products. It merely wants the agency to have enough teeth to prevent banks from “mis-selling” their offers. Nevertheless, Chris Stinebert, the president of the American Financial Services Association that the proposal will “yield little in the way of consumer protection and much in the way of increased costs for consumers”.

Democrats and Republicans alike have voiced their reservations about the CFPA as well. Republicans, in particular, have said that the industry does not need more bureaucracy. It was also concerned that the Federal Trade Commission might be stripped off its current authority. Other agencies will be stripped off its powers as well if the CFPA pushes through.

But Obama’s consumer protection plan is not without its supporters. For example, those who see the gaps and overlaps between regulators praise it because the agency has sweeping powers. Consumer protection is just a single aspect of the reforms planned for the financial industry.

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