The legislation unveiled Tuesday is the first of a number of regulatory bills the administration will send to Congress in the coming months.
The CFPA would have the power to supervise financial companies that sell such products as mortgages, credit cards and payday loans and would improve transparency, protect consumers from unfair practices and bring together fragmented responsibility for consumer protection, said Michael Barr, assistant Treasury secretary for financial institutions, who briefed reporters on the legislation.
“It would be able to level the playing field for high standards for consumers so that we don’t have the experience … of bad practices growing up in the less-regulated, less-supervised sector and [hampering] other financial institutions [from offering] the kind of products and services that they wanted to offer and still be profitable,” Barr said.
The Securities and Exchange Commission would continue to regulate such investment products as mutual funds.
Barr argued that the legislation does not represent heavy-handed government regulation of financial institutions, even though the legislation would require financial institutions to offer “plain vanilla” products for mortgages and other consumer products.
Offering simpler products would allow consumers to compare products more easily, he said.
Despite Barr’s assurances, financial services trade groups oppose the CFPA.
The bill “would create one more agency and create more regulatory gaps at a time when everyone is trying to streamline the regulatory system,” the Financial Services Roundtable of Washington said in a statement.
FSR represents 100 of the largest financial service companies in banking, insurance and investment products.