Financial Regulatory Forum

U.S. lawmakers question Obama plan for consumer watchdog

By Reuters Staff
July 8, 2009

U.S. Representative John Dingell (D-MI)    By Diane Bartz
   WASHINGTON, July 8 (Reuters) – President Barack Obama’s plan to create a single agency, the Consumer Financial Protection Agency (CFPA), to protect consumers dealing with the financial services industry got a skeptical reception in a House hearing on Wednesday.   Democratic lawmakers questioned some elements of the proposal on the grounds that it took jurisdiction away from the Federal Trade Commission, which it oversees, while Republicans expressed concern about the expense of creating a new federal agency and the regulations it might impose.    “I have significant concerns about these plans,” said Rep. John Dingell, a Michigan Democrat, who praised the FTC for “superb work.”
   “At first glance this strikes me as a possibly unwarranted shift of FTC responsibility,” he said.
   The FTC could lose about 60 of the nearly 200 lawyers on its consumer protection staff if the CFPA takes up enforcement authority aimed at preventing deception in mortgage lending, credit reporting and debt collection for financial institutions.
   The FTC, which has authority to enforce some antitrust law as well as consumer protection like credit repair scams, is one of six federal regulators that would lose jurisdiction to the proposed CFPA.
   Rep. Barney Frank, the chairman of the House Financial Services Committee, plans to introduce legislation on Wednesday that would create the CFPA in largely similar form to that proposed by the Obama administration. 
   Rep. Janice Schakowsky, an Illinois Democrat, said she supported the idea of a single agency “absolutely in theory.”
   “How can we be assured that this will achieve its goal and not be just another bureaucracy?” she asked.
   “We’re responsible for making sure. You can hold us accountable,” responded Michael Barr, the Treasury Department’s assistant secretary for financial institutions.
   In his opening remarks, Barr said that the government had failed “in its most basic regulatory responsibility: to protect consumers” and told the subcommittee of the U.S. House of Representatives’ Committee on Energy and Commerce that vesting market-wide authority in one agency would “put an end to regulatory arbitrage” that weakened standards and helped create the current crisis.
   Rep. Cliff Stearns, a Florida Republican, described himself as “very skeptical” of the CFPA and asked Barr how much it would cost, citing the proposal creating it as putting the budget at “such sums as are necessary.”
   “I don’t at this time have a better cost estimate,” said Barr, who also said he was unsure how many people would be moved from other agencies.
   Rep. George Radanovich, a California Republican: worried that consumers “could have less choice and face higher prices.”
   The chairman of the agency at the heart of the discussion, the FTC’s Jon Leibowitz, a Democrat, praised Obama’s determination to end some of the most abusive practices in financial services, like the subprime mortgages that have meant foreclosure for countless families.
   While acknowledging the loss of some jurisdiction, Leibowitz said the FTC would apparently retain a law enforcement role as a back-up to the CFPA.
   He did express concern that the FTC could be hampered by delays under a planned requirement that it notify the CFPA about potential investigations and then wait up to four months for CFPA approval to proceed.
   “Right now there’s a 120-day waiting period that we’re a little concerned about,” he said.
   (Additional reporting by Glenn Somerville, editing by Matt Daily)

See also: Rep. Frank introduces U.S. consumer agency bill

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