Consumer group to lead fight for financial product safety agency
New commission would oversee offerings of such items as home mortgages, credit cards and car loans.
The Consumer Federation of America will lead the charge next year in pushing to create an agency similar to the Consumer Product Safety Commission that would regulate financial services products.
Elizabeth Warren, a law professor at Harvard University, announced Friday the federation will take the lead with its allies in pushing her idea for a Financial Product Safety Commission that would regulate the offerings of such items as home mortgages, credit cards and car loans -- which are overseen by a myriad of state and federal laws and agencies.
"I believe we are in the regulatory moment," Warren said during a CFA conference. "We have a fractured regulatory structure."
The push comes as Warren's star is rising in Washington: Senate Majority Leader Harry Reid, D-Nev., appointed her to the five-member board overseeing the $700 billion Troubled Assets Relief Program, where she was elected chairwoman by its members. In addition, she has been one of the leading critics of the credit card industry, providing intellectual heft to Democratic lawmakers in their drive to further regulate the multitrillion-dollar business. The House passed a measure this year to restrict many card practices that activists called unfair and deceptive.
Senate Banking Chairman Christopher Dodd, D-Conn., has vowed to move similar legislation next year.
Consumer groups will face an array of opponents in their quest as banks, insurance carriers, hedge funds and other firms are lining up to battle over an overhaul of the nation's financial regulatory structure in the aftermath of the banking crisis and subsequent worldwide credit crunch. But it picked up support this year when Senate Majority Whip Dick Durbin, D-Ill., introduced legislation that would create such an agency.
Warren said such a commission would have a more holistic effect than trying to battle businesses legislatively on each specific issue. "You have to fight them one stick at a time," she said. "I think it is too hard." A major effort will to get a narrative across that creation of an agency is predominantly about the issue of safety -- protecting families, just like the CPSC does in keeping lead out of toys. "We are at a critical moment of deciding, what is that message?" she said.
She said opponents will try to argue against the proposal on two basic themes: that it will impose price controls and that such an agency will eventually fall captive to the industries that it regulates.
But she disputed such criticisms, noting that such an agency would be given a broad set of principles to protect consumers rather than rigid rules, so it will have flexibility to respond to changing marketplace conditions rather than using price caps. In addition, Warren mentioned the example of the EPA as a successful agency that is able to regulate an array of industries and be able to carry out its mission to protect the environment. "I wouldn't describe the EPA under regulatory capture," she said.