Fellow consumers, the Obama has a new regulatory agency just for us:
The Federal Reserve would supervise large financial institutions that are considered so big that their failure could undermine America’s economy, according to the administration proposal.
But Obama also would transfer some banking authority that now rests with the Fed and the Treasury Department to the new Consumer Financial Protection Agency.
So what is this new agency supposed to do for us?
The new agency could write rules, reform mortgage laws, examine financial institutions’ practices, enforce compliance through penalties, ban unfair practices and require that companies be "clear and conspicuous" in informing consumers of costs, penalties and risks. It also would allow states to pass laws that are stricter than federal standards.
The agency would require banks and other financial institutions to offer a basic, "plain vanilla" mortgage product with straightforward terms, such as a 30-year, fixed-rate mortgage loan. Consumers could opt for more complicated products, though they would be subject to more stringent rules and disclosures than they are now.
This approach has it’s problems:
"You’re separating out the regulation of the entity from the regulation of the products," [according to] Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, an industry association.
If this new agency is not over lenders, how does it regulate those plain vanilla mortgages- or even the ones with sprinkles?
