House greenlights creation of consumer credit watchdog agency

It's not law yet, but it's come a long way. On Friday, Dec. 11, the House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009, which includes a provision for creating a new agency aimed at protecting ordinary Americans from predatory lending practices. The new Consumer Financial Protection Agency would regulate credit cards, payday lenders, and home, auto and student loans and their underwriters. The Senate will create its own version of this bill, and a final draft would probably be signed into law by next year.

The bill is not without its detractors. Not one Republican lawmaker voting on the bill elected to approve the Act, and the banking industry has been vocal in its disapproval of what it depicts as a power grab by the government that interferes with its business model.


The industry might have lost this battle, though. Although the House and Senate will need to agree on the final details, it's all but a given that the final law will include some kind of consumer lending watchdog agency. The Senate Banking Committee's draft version of a financial reform bill released last month also included a similar provision. In the House version, the new agency would be responsible for enforcing many banking and borrowing regulations included in the new CARD Act addressing credit card abuses.

A single regulatory body that covers all aspects of consumer lending would be a boost for citizens taken advantage of by lenders. Right now, a borrower seeking to file a complaint against a bank, credit card or loan company has to figure which one of six different agencies oversees that particular company. The House bill calls for a single, toll-free hotline at which consumers could register complaints.

While the bill is far from perfect -- enforcement of more complicated topics like derivatives trading has loopholes big enough to drive a truck through -- it's an important step toward creating a system in which borrowers can feel protected and be assured that they have some recourse if a lender tries to separate them from their money illegally.