New Oversight of Credit Cards, Mortgages Hangs in Balance

Credit Card ReformIt is a proposal that has sparked one of the most contentious debates within financial reform: An independent watchdog agency mandated to protect consumers from unfair practices by the providers of credit cards, mortgages and other financial products.
The agency’s decisions on new laws would undoubtedly affect just about every American’s pocketbooks.
The Consumer Financial Protection Agency, CFPA, is a keystone of President Obama’s financial reform initiatives. And it is fighting for its life in the Senate.
Sen. Christopher J. Dodd, D-Connecticut, chairman of the Senate banking committee, is seeking Republican support for a broader financial reform package. But attaching the CFPA proposal to such financial system overhaul – as the House did in its partisan passage of reform in December – is proving to be a most formidable task.
Dodd most recently said that he and Republican Senator Bob Corker, R-Tennessee, are attempting find a consensus on financial reform, but Corker has clearly opposed the CFPA.
Republicans, bankers groups and the U.S. Chamber, which represents small businesses, have opposed the CFPA for months, in well-organized and well-bankrolled campaigns. Those opposed to the CFPA say any new consumer protections should be part of  expanded regulatory authority designed to protect the economy from “systemic risk,” primarily weaknesses with financial institutions that would have been deemed “too big to fail” in the past.
Opponents say the CFPA would unnecessarily add to government bureaucracy and create vague legal authority over businesses, even threatening access to credit by small businesses, according to the U.S. Chamber.
As it is being proposed, the CFPA would hold the authority to write rules under existing financial laws, such as the Truth in Lending Act and the Equal Credit Opportunity Act. The CFPA’s rules would cover most financial products providers, including banks, thrifts, credit unions and non-bank financial institutions. It would have the power to amend even credit card reform laws that are slated for full compliance on Feb. 22.
This past week, however, the pro-CFPA side began to make its voice be heard louder than in previous months in a potentially last-ditch effort to draw more public support to the issue.  
In an unusual type of press conference this week, several state attorneys general announced their support for the new agency.  They included Connecticut Attorney General Richard Blumenthal; Illinois Attorney General Lisa Madigan; Iowa Attorney General Tom Miller; and Ohio Attorney General Richard Cordray. They said the CFPA is critical to shielding consumers from industry abuses.
“Big banks and Wall Street investment firms that torpedoed our economy now want to tank a proposed Consumer Financial Protection Agency — spending millions on lobbyists to fight the proposal,” Blumenthal said.
Equally strong words came from one of the CFPA’s leading proponents, Elizabeth Warren, a law professor at Harvard who is currently the chair of the TARP (Troubled Asset Relief Program) Congressional Oversight Panel.
“The CFPA will consolidate seven separate bureaucracies, cut down on paperwork, and promote understandable consumer products,” Warren said in a Feb. 8 opinion piece in the Wall Street Journal.
She then unleashed on CFPA opponents, primarily Wall Street’s biggest financial players.
“This generation of Wall Street CEOs could be the ones to forfeit America’s trust,” Warren wrote. “When the history of the Great Recession is written, they can be singled out as the bonus babies who were so short-sighted that they put the economy at risk and contributed to the destruction of their own companies. Or they can acknowledge how Americans’ trust has been lost and take the first steps to earn it back.”

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