Next Wednesday, the Obama administration is expected to announce comprehensive reforms on the way the financial system is regulated. One of the proposals thought to be contained in the plan is for an independent financial consumer protection agency.
Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, Chris Dodd had been reserving judgment, but yesterday announced his support for such an agency, which would be responsible for “seeking out and putting an end to abusive financial practices.”
Under Dodd’s proposal, the independent consumer protection agency would:
* Have broad regulatory and enforcement authority over credit and bank products;
* Be responsible for protecting consumers from predatory practices of payday lenders, mortgage brokers, banks, and other financial institutions;
*have a seat next to the safety and soundness regulators as part of a systemic risk council.
Needless to say, the push back has already started from banking groups, and hints of inter agency turf wars, with SEC Chairman Mary Schapiro sending warning signals back in May that consumer protection shouldn’t be moved out of her agency’s broader role of regulating stocks and mutual funds.
“I question profoundly any model that would try to move investor-protection functions out of the Securities and Exchange Commission…It’s not a discrete thing that gets moved away without really damaging the fabric of the entire investor-protection regime.”