Protecting against predatory financing

by: Jason Springer

Wed Jun 10, 2009 at 05:29:13 PM EDT

Support is growing in Congress for more efforts to protect consumers from bad financial practices involving mortgages, predatory lending, credit cards, retirement accounts, payday loans and other financial instruments. In response, a bill is has been introduced to create a new agency that would oversee and regulate the process:

It's called the Financial Product Safety Commission and is modeled after the Consumer Product Safety Commission. The new agency, endorsed by a long list of consumer organizations, could become a part of a new regulatory scheme almost certain to emerge from the country's experience with what's been called the Great Recession.
A bill establishing the agency has been introduced in the House and the Senate. It would "prevent and eliminate practices that lead consumers to incur unreasonable, inappropriate, or excessive debt, or make it difficult for consumers to repay existing debt, including practices or product features that are abusive, fraudulent, unfair, deceptive, predatory, anti-competitive, or otherwise inconsistent with consumer protection."

Not surprisingly, Scott Garrett opposes this effort saying the problem isn't deregulation, but actually too much regulation (no joke):

"Failed regulation, government policies and inappropriate intrusion by the federal government into the market were in large part what caused the financial crisis," he says.
Garrett says he is "skeptical" about the ability of any new regulator to "promote stability in the marketplace or truly provide a service to the consumer."

Leonard Lance thinks we can fix what we already have:

"I am not in favor of creating new agencies simply to have new agencies," says Lance, "but I would be willing to work with the new administration to create more effective consumer protection."

But Congressman Holt doesn't think that's possible and if you follow me below the fold, you can see the rest of the story.

Jason Springer :: Protecting against predatory financing

Whether existing agencies can be reformed may be the key issue on the minds of lawmakers. Rep. Rush Holt says the Securities and Exchange Commission (SEC) should fill that role but, he says, "It appears to be more of a lapdog than a watchdog."
"Can the SEC be reformed? I suspect not," says Holt.

Congressman Pallone said he thinks some form of consumer financial protection is likely to be enacted by Congress, probably by the end of the year. Congressman Rothman said "It's time" and Sires mentioned another potential option:

Rep. Albio Sires notes that Congress also may opt for a so-called "super-regulator" that would cover all financial transactions, not just those dealing with consumers. Either way, he says, "what's important is getting more information about financial transactions to both consumers and Congress."

It seems like there is enough momentum to get something done on this, the question is how much pressure will be applied to water down this effort too? No doubt there will be intense pressure applied.