Proposed consumer protection agency to target lenders

Mother Duck and Ducklings

Are we all destined to be under a consumer protection agencies' wings? Image from Wikimedia Commons.

In the wake of the Wall Street collapse and the ongoing investigation of Goldman Sachs, there are calls for a consumer protection agency, or multiple ones. There seems to be a real need for some financial reform, but which consumer protection laws should be put forth are a point of contention.  Part of the proposed new agency would create national regulation of credit cards, payday lenders, possibly even car dealers.  Where this potential agency and the financial reform bill will go are yet to be determined.

Consumer protection agency proposals

A recent post on the NASDAQ website reported some of the proposals and arguments pursuing a consumer protection agency in Congress.  Currently, the proposed consumer financial protection agency would be an entirely new agency.  An amendment is being put forth by Senator Chris Dodd (D-CT) that would change it to a bureau within the Federal Reserve.  Senate Republicans are looking to scale back the scope and power of the proposed agency, while some Senate Democrats wish to see the agency as an entity all its own. The bill is opposed by the U.S. Chamber of Commerce.

What would be the powers?

The proposed agency would not regulate what any business or retailer that does not offer financial services may do.  In other words, if you’re on a payment plan with a doctor or lawyer for services rendered, it doesn’t cover that if you feel you’ve been bilked.  Another amendment is being sought by Sen. Sam Brownback (R – KS) that would exclude auto dealers from any regulation by the proposed consumer financial protection.

Senator Hagan goes after payday lenders

Senator Kay Hagan (D-NC) plans to offer an amendment that would place new federal regulation on payday lenders.  The amendment, which is co sponsored by Sen. Dick Durbin (D-IL) and Sen. Charles Schumer (D-NY), would limit payday lenders to making six loans a year to any one person.  She countered criticism by stating that the Federal Deposit Insurance Corporation already imposes that restriction on banks.

Other concerns

From a New York Times article, Senator Mitch McConnell (R-KY) said that the language was too ambiguous to determine just who would be caught in the net. “Financial services” is a far reaching term.  That could easily include car dealers, and restrictions could make it harder to purchase cars.   Many jewelers offer financing, and many businesses like furniture stores, guitar stores, etc.  offer layaway plans. Many other businesses, many of which are the small businesses of Main Street, could be negatively affected. Those businesses deserve freedom to thrive rather than being protected into extinction.

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