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Consumer protection agency could fix credit woes says Warren
WASHINGTON (6/25/09)--In remarks delivered during a Wednesday House Financial Services Committee hearing, Elizabeth Warren, current chair of Congress’s Troubled Asset Relief Program oversight panel, said that the creation of the proposed consumer financial protection agency would undeniably “help fix the broken credit market.” The consumer protection agency would not be meant to rescue consumers that have willfully overextended their credit or have purchased a home that they cannot afford. Rather, Warren said, “this is about people who get trapped by credit agreements themselves.” Warren said that many consumers do not understand the terms of many of their consumer loans and other finance-related products, including credit scores. Credit unions and small banks may offer financial products that are better for consumers than those offered by larger banks, but smaller financial institutions with smaller advertising budgets often lose out when consumers lack the proper tools to compare those products, Warren said. Though some of the gathered representatives and panelists said that the proposed consumer financial protection agency would lead to duplicative and unneeded regulations, Warren said that getting so-called “plain vanilla” financial products and disclosures that “automatically passed regulatory muster” would result in cheaper compliance costs for lenders and fewer oversight responsibilities for regulators. According to Warren, creating this new separate regulator will help smaller financial institutions that did not cause the problem “but are now being forced to pay for it” by lowering the “direct cost of compliance” through streamlined financial regulations that protect consumers while lessening the burden on all financial institutions. The agency could also level the playing field between large and small financial institutions by helping create the “appropriate financial market” where many of the “cleaner” and “better” products offered to consumers win out over more complicated, riskier financial products, she added. House Financial Services chair Rep. Barney Frank (D-Mass.) said that the committee would continue to discuss the creation of the new consumer protection agency once it has returned from the Independence Day district work period. The committee should begin marking up related legislation in July, Frank added. While Frank said that the final regulatory reform legislation would take the form of one all-encompassing bill, each piece of that legislation will be discussed and marked up separately by his committee.


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