Your new consumer watchdog

June 30, 2009

The Obama administration just released draft legislation for its newly proposed Consumer Financial Protection Agency. The 152-bill would create a five-member commission with the power to make rules and issue subpoenas. 

The new agency’s primary mandate will be to push for greater fairness by mortgage lenders and credit card issuers. That’s important stuff. But sadly, the agency’s mandate appears limited. There’s no discussion in the agency’s enabling legislation that would specifically permit it to look at things like life settlements, structured settlements or structured notes.

The agency would have the power to coordinate with the SEC and CFTC to make sure that there is “consistent regulatory treatment of consumer and investment products or services.” For purposes of this new agency, an investment product is one that “competes directly with, a consumer financial product or service that is subject to the jurisdiction of the Agency.”

That’s pretty vague stuff. But it doesn’t look like this new agency is meant to come up with a broad definition of a “consumer financial product.” Again, just think mortgage and cards.

And that probably means it’s up to the SEC and CFTC to focus on those more exotic investment products. Oh brother.

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