WASHINGTON (CNN) - If you hold a credit card, mortgage or a student loan, Congress is considering a new agency designed to give you a lot more protection. Called the Consumer Financial Products Agency, it would set new rules to simplify contracts, eliminate fine print, and get rid of the tricks and traps that led so many people to unwittingly sign up for mortgages they couldn't afford.
Guess who is fighting it? The financial services industry. According to one of the industry's top lobbyists, stopping the agency is "our number one priority." That's no small thing given the industry that spent $373 million on lobbying last year alone, according to the Center for Responsive Politics. He insists any changes in the industry would have devastating effects on the economy. He worries the agency "basically has no restrictions on what they can do in the area of consumer protection" and warns this could freeze up the credit market: "If credit goes up and costs more, some people that are eligible for credit today will not be eligible in the future."
"This is the biggest financial fight I have seen in the 20 years I've been in Washington," says Ed Mierzwinksi, with of the U.S. Public Interest Research Group (U.S. PIRG), a consumer advocacy organization. Consumer groups are outraged by the industry's opposition. "The people who are gearing up to kill the agency are the companies whose irresponsible practices and abuses led to the collapse of the world economy," says Mierzwinski. PIRG is one of approximately 200 groups which have formed a coalition called Americans for Financial Reform, which will be pushing Congress to approve the new consumer agency.
President Barack Obama proposed the agency last month as a centerpiece of his new plan for financial regulation. He called it "a new and powerful agency charged with just one job: looking out for ordinary consumers." And it would be designed, he said, to avoid a repeat of the worst abuses that caused the subprime mortgage crisis. As the president explained, "the most unfair practices will be banned. Those ridiculous contracts with pages fo fine print that no one can figure out – those things will be a thing of the past. And enforcement will be the rule not the exception."
The agency was the brainchild of Elizabeth Warren, who is Congress' watchdog for the Wall Street bailout as chairwoman of the Congressional Oversight Panel. She says the agency would require that companies offering credit cards and loans have "page and a half long credit card agreements; there's the interest rate, there's what causes a penalty and how much you'll get charged."
The result says Warren?
"You can compare four credit card agreements in under 30 seconds and you can tell which ones the cheapest which is the riskiest." Unlike current practice, the agency will have enforcement power. "It will have the power to sue [lenders] if they're not following the rules."
Supporters say it's no different from the agencies that oversee how prescription drugs are made, or whether electronic equipment is safe. Warren insists the new limits would help the nation's overall economic picture by reducing the amount of risk in the system. But opponents see it very differently. "I don't think anyone would argue that over the last thirty years financial innovation has been the fuel of the economy," says industry lobbyist Chris Stinebert, CEO of the American Financial Services Association, who believes that's reason to tread carefully. "We need to move more slowly. We need to answer some of these tough questions about cost, about consequences, about will it stifle innovation." The association has joined with other industry groups to fight the proposal.
The House Financial Services Committee, which has been holding hearings on the agency over the last weeks, is planning to vote on it in two weeks. So far there is strong opposition to the plan.