Plan for Consumer Agency Criticized
Thursday, July 9, 2009
President Obama's proposal to create a new agency to protect consumers against abusive financial practices ran into skepticism yesterday from members of his own party on Capitol Hill.
Some Democrats on a House committee that oversees the Federal Trade Commission joined Republicans in questioning whether the creation of a new regulator -- the Consumer Financial Protection Agency -- would strip the FTC of its authority and create yet another layer of federal bureaucracy.
"I have significant concerns about these plans," said Rep. John D. Dingell (D-Mich.), who urged his colleagues to treat the new proposal with caution. "At first glance, this strikes me as a de jure and possibly unwarranted reassignment of FTC's consumer protection authorities in the financial services area."
Yesterday's resistance came during a hearing of a House Energy and Commerce subcommittee. It offered a preview of the conflicts and power struggles unfolding within the government, where no agency wants to cede power to another, as the Obama administration attempts to establish a new regulator.
Rep. Henry A. Waxman (D-Calif.) said he endorsed the idea of a fresh approach to consumer protection, but cautioned "it only makes sense to create a new agency if that new agency will become a strong, authoritative voice for consumers." He added that the FTC should be "strengthened, not weakened by any changes."
As proposed, the new consumer protection agency would possess broad powers to oversee a variety of financial products, from mortgages to credit cards. Some business lobbyists and trade associations have lined up to resist the proposal, claiming that the new agency would increase costs for consumers, stifle financial innovation and exacerbate the patchwork nature of current regulation.
Currently, the FTC enforces consumer protection laws that apply to institutions other than banks, covering issues that include identity theft and telemarketing fraud. It also maintains oversight over deceptive and unfair practices in the financial services industry, including predatory or discriminatory lending practices. Under the new plan, the FTC would stand to lose some of its jurisdiction.
Responsibility for drafting legislation for the new agency lies with the House Financial Services Committee and its chairman, Rep. Barney Frank (D-Mass.), a supporter of the proposal who has said he plans to move on the bill by the end of the month. But skeptical Democrats and outspoken Republicans could slow the process as the bill moves to the Senate.
Michael S. Barr, the Treasury Department's assistant secretary for financial institutions, said during yesterday's hearing that he understands the concerns about the reach of the new agency. Still, he said, "It's important to keep in mind the central goal we all share -- having one agency for one marketplace for one mission: protecting consumers."