Credit cards, mortgages could be overseen by new agency

06.17.09
By Sarah Beldo

Credit cards, mortgages, private student loans and other consumer products could soon be overseen by a new federal body.

In the midst of the worst economic crisis in several decades, the Obama administration is set to propose a sweeping reform to the way the financial industry is regulated.

This plan includes the creation of the Consumer Financial Protection Agency, with the goal of regulating credit, savings and payment products and services.

One of primary the goals of the new body would be to make sure Americans have all of the information they need about costs, fees and risks before they agree to the terms of a new product.

Not only would the agency be given authority to set standards within the industry - such as a prohibition on confusing language in your credit card bill - but it would also have the power to crack down on financial institutions that engage in unfair or deceptive practices.

In the wake of the subprime mortgage crisis, an important responsibility of the new agency would be to ensure mortgage loans are written clearly, with straightforward terms.

Additionally, it would prohibit certain incentives for mortgage brokers that, during the era of widespread subprime borrowing, had led to consumers being steered toward more expensive home loans.

Although some critics have expressed concern that strong regulation could hamper the development of innovative new financial products, President Obama is adamant that the plan is in consumers' best interest.

In a March appearance on The Tonight Show with Jay Leno, Obama explained, "When you buy a toaster, if it explodes in your face, there's a law that says, 'Your toasters need to be safe.'"

"When you get a credit card or you get a mortgage, there's no law on the books that says, 'If that explodes in your face financially, somehow you're going to be protected.'"

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The Consumer Financial Protection Agency, with the goal of regulating credit, savings and payment products and services.