Consumer protection agency plan questioned
Proposal's backers say new agency would beef up protections for consumers without getting too much in the way of the FTC.
Facing skeptical House Energy and Commerce members concerned over losing jurisdictional turf, Obama administration officials said Wednesday a proposed Consumer Financial Protection Agency would not seriously impact the Federal Trade Commission and would ultimately provide a greater benefit to consumers who have been targeted for predatory loans and abusive credit card practices.
Assistant Treasury Secretary Michael Barr and FTC Chairman Jon Leibowitz both made their pitch to the Energy and Commerce Commerce, Trade, and Consumer Protection Subcommittee Wednesday, arguing the FTC would gain new authority, such as streamlined rulemaking and the ability to impose civil penalties for unfair and deceptive practices, even though it would also have to give up some power to the new agency over supervising financial firms.
"The FTC is a good agency. The chairman ... and I are good friends. Our legislation does not affect the jurisdiction of the FTC over the vast array of nonfinancial markets and actually strengthens its ability to police those markets," Barr said.
Leibowitz said consumers would "be getting a better deal" under the Obama draft bill because the FTC does not have authority over banks -- which resides with banking regulators -- while the proposed agency would.
Their testimony comes as House Financial Services Committee Chairman Barney Frank, D-Mass., plans to file a bill Wednesday to create the agency, which is strongly supported by consumer groups but is ardently opposed by financial lobbying groups.
Frank also will have to avoid turf battles with the Energy and Commerce Committee, which were more common under the panel's previous chairman, Rep. John Dingell, D-Mich.
Although the administration testimony was met with skepticism among most Republicans and some Democrats, Energy and Commerce Committee Chairman Henry Waxman, D-Calif., said he would support the plan as long as the FTC "is strengthened, not weakened by any changes."
Energy and Commerce Commerce, Trade, and Consumer Protection Subcommittee ranking member George Radanovich, R-Calif., pressed Leibowitz, noting that his agency would be giving up some turf in the proposal even with the proposed sweeteners. "It seems to me you are getting ... more money and authority to do less," Radanovich said.
Leibowitz countered his agency would still retain backstop authority on financial matters, but that consumers would ultimately benefit because the new agency would have expanded powers over mortgage lending, credit insurance and credit cards.
"We're going to be able to do more for consumers," Leibowitz said.
But Leibowitz did call for some revisions to the Treasury draft such as shortening the review period that the FTC would have under its backstop authority to take action and clarifying terms such as "credit" and "financial activity" in the draft.
He said the latter were broad and could lead to uncertainty over whether his agency or the new entity would take action in cases such as illegal telemarketing for financial products.
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