5 Potential Benefits of The Consumer Financial Protection Agency |

A new bill introduced this week will form a government agency designed with the protection of the consumer in mind. Senator Chris Dodd, the Chairman of the Senate Banking Committee, introduced the bill that would create the Consumer Financial Protection Agency, a group designed to protect consumers from fraud and abuse. The committee commented in introducing the bill that Americans already have protection in place from things like faulty appliances, contaminated food, beverages, and toys, but no protection from faulty or unfair financial products or services. This group would be charged with keeping a close eye on banks, lenders, mortgage brokers, and payday lenders.

The bill comes as a result of the observation that while big banks got protection from the Federal Reserve, there was no one there to look out for the best interest of consumers. New credit card laws and rules will help eliminate some of the abusive practices that have concerned lawmakers but the formation of the Consumer Financial Protection Agency would be beneficial to consumers in the following ways.

Consolidate Consumer Protection: Right now, there are elements of consumer protection that fall under various government agency responsibilities. Groups like the Office Of Thrift Supervision, the FDIC, the National Credit Union Association, the Federal Reserve, and the Federal Trade Commission all have certain responsibilities that protect consumers from abuse and fraud. However, many abusive and fraudulent practices fall into the gray areas between the defined responsibilities of each group and end up slipping through the cracks. This new agency would handle all areas of consumer protection. Many agencies have pointed fingers at each other in trying to determine who could have done more to protect consumers.

Create and Enforce Regulations: Currently, there is no government agency that has the ability to not only create rules to protect consumers, but also enforce those rules. The Consumer Financial Protection Agency would have the authority to create new rules, enforce the rules that they create, and investigate practices that could be unfair to consumers.

Act as a Watchdog: When credit card companies panicked and starting taking out their frustrations on their customers, it took a massive, organized effort from the government to address the abuses and many of the new rules governing credit card issuers still won’t go into effect for the next several months. This new agency would be constantly watching for business practices that harmed consumers and would have the ability to act quickly in protecting consumers.

Empower States: Another element of the bill would give states the power to create ways to protect their citizens from abusive or fraudulent practices. Currently state regulations are generally overshadowed by Federal regulations but this bill would put a great deal of protective ability back into the hands of the states.

Unite Industry Supervision: Banks have been fairly closely regulated, at least on paper, over the past several years. But other providers of financial services such as mortgage brokers and payday lenders have been under much less scrutiny. These industries that are closely tied together would all be watched by the Consumer Protection Financial Agency, putting some of these types of companies under that watchful eye of regulators for the first time.