Consumer Protection Agency on its way…
President Obama has drafted a consumer protection bill that would create a Consumer Financial Protection Agency. The purpose of this agency is to ensure that consumers are protected from unscrupulous lending practices. Moreover, the agency would make sure that consumers get a better understanding of financial products and services.
What the new Bill aims to do…
It is expected that the new Bill would bring about more transparency in financial transactions, simplify financial documents for consumers, and improve the operations of unregulated financial services. The aim here is to create a platform where banks and companies would be subject to a single set of rules and laws being enforced.
The Consumer Protection Agency will be regulating transactions related to mortgages, credit cards, payday lending, overdraft fees and make the rules consistent among different types of products. Besides, efforts will be taken to minimize the number of disclosures required in home buying/mortgage transactions.
What the industry has to say about the new Bill…
The industry is a bit skeptical as to whether the new Bill will be effective in protecting consumers. Some lawmakers are of the opinion that the Consumer Protection Agency may pose a threat to economic liberty.
Experts feel that the government should aim to strengthen the existing regulations instead of creating a separate set of rules. They believe tough laws enforced within each and every state may seem to be a burden for banks, their costs may increase and consumers relocating from one state to another may get confused as to which rule they’ll follow.
Apart from creating a Consumer Protection Agency, President Obama has also proposed to eliminate the Office of Thrift Supervision which supervised institutions such as Washington Mutual and AIG that experienced loss during the credit crunch. Then there’s also the plan to establish the Financial Services Oversight Council to keep a watch over the entire US financial system. The new Bill and other proposals put forward by President Obama would be sent to the Congress for further review.