Obama Calls For Creation Of Consumer Financial Protection Agency

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President Barack Obama sought Friday to emphasize the need for reform of financial regulation and especially for a new consumer financial protection agency he hopes to create.

Speaking before a crowd of lawmakers and consumer advocates in the White House, Obama said protecting consumers in the financial marketplace was a central part of regulatory reform efforts.

"It's true that the crisis we faced was caused in part by people who took on too much debt and took out loans they couldn't afford," he said. "But my concern are the millions of Americans who behaved responsibly and yet still found themselves in jeopardy because of the predatory practices of some in the financial industry."

He added, "These are folks who signed contracts they didn't always understand offered by lenders who didn't always tell the truth. They were lured in by promises of low payments, and never made aware of the fine print and hidden fees."

Citing abuses in mortgage lending, overcharging fees at banks and high-interest "payday loans," Obama said the country has seen a series of abuses in the financial sector.

"Abuses like these don't just jeopardize the financial well-being of individual Americans, they can threaten the stability of the entire economy," he said. "And yet, the patchwork system of regulations we have now has failed to prevent these abuses."

He added, "With seven different federal agencies each having a role, there's too little accountability, there are too many loopholes, and no single agency whose sole job it is to stand up for people."

The Consumer Financial Protection Agency he hopes to create would centralize the oversight of the financial industry and set clear rules for all companies, Obama said.

"In a financial system that's never been more complicated, it has never been more important to have a watchdog function like the one we've proposed," he said. "And yet, predictably, a lot of the banks and big financial firms don't like the idea of a consumer agency very much."

Obama singled out the U.S. Chamber of Commerce as a particular culprit, saying it had launched a misleading series of ads trying to kill the reform.

"You might have seen some of these ads -- the ones that claim that local butchers and other small businesses somehow will be harmed by this agency," he said. "This is, of course, completely false and we've made clear that only businesses that offer financial services would be affected by this agency."

He added, "I don't know how many of your butchers are offering financial services."

Obama said that "nothing could be further from the truth" than the allegations that such an agency would stifle innovation in the financial products marketplace.

"In the past, a lack of clear rules led to innovation of the wrong kind. The firms that did best were the ones who did the best job of hiding the real cost to consumers," he said. "We don't want them competing by figuring out how much they can fool ordinary Americans. By contrast, the consumer agency we're proposing would set ground rules so that firms don't have to compete to confuse families, but they have to compete to give them better choices."

He added, "This will also help small business entrepreneurs who often rely on credit cards and home equity loans to finance their start-up businesses."

Obama said that in spite of intense lobbying to kill or weaken the proposed agency he would "not allow" the country to go back to the days where there was too little accountability and protections for consumers.

"It is time for us to move forward. It is time for real change," he said. "I'm confident that we're going to get it done… with the help of the American people, who are going to demand a better deal from their financial services."

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