Tuesday June 16, 07:31 PM
Obama to set up US consumer protection agency
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WASHINGTON (AFP) - President Barack Obama plans to set up a federal consumer financial protection agency to shield Americans from predatory practices from credit card firms, banks and mortgage markets, an official said.
The Consumer Federal Protection Agency (CFPA), to be set up among regulatory reforms Obama is due to unveil on Wednesday will cover credit, savings and other payment markets, an Obama administration official said.
It will be guided by five principles, the official said on condition of anonymity, including "transparency, simplicity, fairness, accountability, and access."
The agency is one of a number of reforms which Obama is expected to lay out in his latest attempt to shield consumers from the ravages of an out-of-control finance industry blamed for pitching the US and global economy into crisis.
"We are going to put forward a very strong set of regulatory measures that we think can prevent this type of crisis from happening again," Obama said, after meeting South Korean President Lee Myung-Bak at the White House.
The official said the administration had concluded that previous reforms of the subprime mortgage market and the credit card industry had not yet ensured sufficient protection to consumers and that more measures were needed.
The new agency will be designed to promote concise and clear information for consumers and protect them from "unfair and deceptive practices," the official said.
It would promote fair, efficient, and innovative financial services markets for consumers and improve access to financial services.
The agency will also have the power to reform US mortgage laws to ensure customers get simple mortgage disclosures, and are full aware of risks and benefits of various mortgage products, the official said.
US Treasury Secretary Timothy Geithner and chief White House economic adviser Lawrence Summers gave a broad outline of their plan to better regulate the finance industry in an op-ed piece in The Washington Post on Monday.
The government is set to impose stringent capital and liquidity requirements for the largest and most "interconnected" financial firms, they wrote.
All large financial institutions whose failure could threaten the stability of the system will be subject to supervision by the Federal Reserve.
The government will also establish "a council of regulators" with broader coordinating responsibility across the system.
Geithner and Summers further argued that the dramatic growth in financial activity outside the traditional banking system, such as the spread of asset-backed securities, has led to "an erosion of lending standards" which deepened the bust in the housing sector.
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