Here's some potential good news for consumers! Americans may be getting some breathing room from exuberant credit card rates and predatory lending practices.
President Obama's plan is reportedly based on legislation introduced by Senator Dick Durbin (D, Ill) and backed by Senators Chuck Schumer (D, NY) and Ted Kennedy (D, Mass).
It's also been emphasized that this new consumer protection agency will have significant power unlike past consumer protection agencies.
The scope of the CFPA would likely include the following:
- Enforcing protection from deceptive practices. The agency would ensure that consumers could access concise and clear information about the financial products offered to them and that agencies are prohibited from using deceitful marketing tactics.
- Enforcing more full disclosure regarding financial products. Creditors will likely be required to be upfront with the reasons for fees, costs, penalties, and sudden interest-rate hikes.
- Discouraging risky financial products. The agency would add hurdles to the process of signing agreements for risky products like subprime mortgages and complex credit cards for consumers who may be better served with standard and less risky lending arrangements.
- Removing the risk factors for another mortgage crisis. This could involve implementing significant structural changes to the mortgage lending industry to prevent another housing market meltdown.
- Overseeing the Community Reinvestment Act (CRA). The agency would also be involved with overseeing the progress of the CRA. The CRA encourages financial institutions to lend to financially disadvantaged communities.
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