PersonalFinance: Don't wait for Congress, be your own regulator

By Linda Stern

WASHINGTON (Reuters) - President Barack Obama's plan to create a federal agency to protect consumers from tricky or hazardous financial products may never make it through the Congress, if the bankers have their say.

Financial services companies are coming up with cash nobody knew they had to fight the proposal, which would put hidden credit card fees on a par with faulty bike helmets and flammable pajamas.

Consumer advocates are asking Congress to create such an agency, which would focus on financial products like checking accounts and mortgages, regardless of what kind of financial company was issuing them.

Currently, different federal agencies oversee different kinds of banks, and their rulings on bank products can differ from agency to agency and bank to bank. The proposed new agency would review credit cards, insurance products, bank accounts and other financial tools for their clarity and safety.

"Although a Consumer Financial Protection Agency would not be a panacea for all current regulatory ills, it would correct many of the most significant structural flaws that exist," two long-time consumer advocates told a congressional hearing on June 24.

Travis Plunkett of the Consumer Federation of America and Edmund Mierzwinski, with the U.S. Public Interest Research Group, laid out the case for creating such an agency before the House Committee on Financial Services.

Harvard law professor Elizabeth Warren, whose highly publicized early warnings about consumer debt made her a rock star in the current credit-collapse, testified that a new watchdog agency could be the cure for what ails America's debt-strapped households.

As chairman of the Congressional Oversight Panel of the Troubled Asset Relief Program, she could well be in line to head the new agency, if it is ever created.