Agency would target financial traps
TEXT OF STORY
Tess Vigeland: We got some details today about that new Consumer Financial Protection Agency being proposed by the Obama administration. This would be the financial equivalent of the folks who are supposed to keep us safe from lead toys and faulty appliances. Marketplace’s John Dimsdale reports the new agency would have powerful tools to discipline banks and other lenders.
JOHN DIMSDALE: The proposed Consumer Financial Protection Agency could issue subpoenas, hold hearings and go after court orders to stop abusive banking practices. Assistant Treasury Secretary Michael Barr says the agency will be able to vigorously enforce consumer protections.
MICHAEL BARR: Our view has been you need to have regulation that establishes a level playing field for good competition, good innovation, financial innovation, on the basis of a baseline of respect and dignity that I think all consumers are owed.
Bankers, though, say the new regulator will end up hurting innovation. Scott Talbott with the Financial Services Roundtable says regulatory scrutiny will have a chilling effect on cheaper loans and credit terms.
SCOTT TALBOTT: What you’ll see is companies will probably only offer plain vanilla products and will be reluctant to venture into new territory and create new products for fear of over-regulation or even lawsuits for offering different types of products beyond the plain vanilla ones.
ELIZABETH WARREN: You know, I see it as exactly the other way.
Harvard law professor, Elizabeth Warren, chairs Congress’s oversight panel on financial regulations.
WARREN: This is about getting rid of the tricks and the traps. If the only way you can really put your product out there is to fool people, to give ’em a bunch of incomprehensible language, bury everything in the fine print, then it’s not going to work.
The President’s proposal was welcomed by Democratic leaders in Congress today. They say establishing the new consumer protection agency is a high priority this year.
In Washington, I’m John Dimsdale for Marketplace.
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