Obama: GOP Plan Would ‘Gut Consumer Protections’

President ObamaPresident Obama today lashed out against a Republican amendment proposing a consumer financial protection agency without the autonomous and sweeping authority over credit cards, mortgages and other loan products that is sought by Democrats.
The Senate yesterday overwhelmingly approved the first Wall Street reform amendment creating a process to liquidate large financial firms that pose a systemic threat.
But a central reform proposal of an agency to oversee consumer loan products is still very much a hotly debated issue.  
For months, bank lobbyists and some business groups have campaigned vigorously against the initial plan by the Obama Administration that calls for an agency independent of the current regulatory system.
The Republicans want to create a division of consumer protection within the Federal Deposit Insurance Corporation, and subject it to FDIC rules. The FDIC’s primary role, White House officials say, is the safety and soundness of banks, not protecting consumers from unfair or predatory practices.
The Republican proposal would exempt from federal oversight non-banking institutions that provide payday loans and other financial services. It would also exempt debt collectors.
As envisioned by Obama, the agency would oversee all loan products, even those offered by non-banking companies.
“This amendment will significantly weaken consumer protection oversight, includes dangerous carve outs for payday lenders, debt collectors, and other financial services operations, and hurts the ability of community and local banks to compete by creating an unlevel playing field with their non-bank competitors,” Obama said in a statement.
Republicans oppose an autonomous agency, contending it amounts to over-regulation and the standardization of loans that would further contract lending to both businesses and households.
“What we do know is that this new agency would be authorized to gather information on banking and purchasing patterns and on anyone operating in consumer financial markets,” said Senate Republican Leader Mitch McConnell, of the Democratic plan .
But the Republican amendment would prohibit “updating existing subprime regulations that protect consumers from abusive loans, and it would block states from enforcing the law,” wrote Communications Director Dan Pfeiffer on the White House blog yesterday.
Obama said in his statement: “Alternatives that gut consumer protections and do nothing to empower the American people by cracking down on unfair and predatory practices are unacceptable, and I urge the Senate to vote no on weakening consumer protections and instead stand with the American people.”

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