Consumer Groups Praise Idea of Financial Protection Agency

The Obama administration's push to create a Consumer Financial Protection Agency, the subject of sharp criticism from many in the financial and business world, found a chorus of support on Capitol Hill yesterday as consumer advocates praised the proposal in testimony before the House Financial Services Committee.

"It targets the most significant underlying causes of the massive regulatory failures that have harmed millions of Americans," said Travis Plunkett, legislative director for the Consumer Federation of America.

The administration envisions a new agency with broad powers to oversee a range of financial products, from mortgages to credit cards. The idea is to help safeguard Americans against deceptive and abusive lending practices that contributed to the current crisis.

But the proposal has encountered stiff resistance from financial and business interests, most recently on Wednesday, when critics told the same House panel that a new agency would add another layer of government regulation, increase costs, stifle innovation and curtail choices for consumers.

Consumer advocates yesterday could not have disagreed more.

"They've offered an elaborate defense of the status quo," Plunkett said.

Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, compared the need to regulate financial products to regulation of other consumer products.

"We regulate toasters to make sure they don't catch fire. We're not banning toasters," he said. "We're simply saying they have to be safe."

Mierzwinski, Plunkett and others are part of a sizeable coalition that has formed to fight financial industry groups and others whom they regard as trying to undermine the administration's efforts to overhaul the current regulatory system. The alliance, which calls itself Americans for Financial Reform, includes a collection of nearly 200 consumer, labor and civil rights organizations. It has created a Web site, OurFinancialSecurity.org, and has undertaken aggressive outreach to try to persuade lawmakers and boost grass-roots support.

Earlier this week, the coalition staged protests at banks and local chambers of commerce across the country to support the new consumer agency.

And yesterday its members took their message back to Capitol Hill.

Consumer protection failures are "very much the root of the crisis we find ourselves in today," said Nancy Zirkin, executive vice president of the Leadership Conference on Civil Rights. "When regulators are financially dependent on the institutions they police, consumer interests will always be squeezed out." The proposed new agency, she said, "will break this pattern."