Financial services industry trade groups are making cautionary noises against President Barack Obamas proposed regulatory overhaul to create a Consumer Financial Protection Agency.
The agency would be tasked with writing rules and levying fines on a variety of consumer-oriented financial products. It would also have the ability to ban specific financial products if they are deemed too risky.
The financial health of these institutions would continue to be regulated by established agencies.
None of the trade groups has gone so far as to form a coalition or all-out lobbying campaign against the agency, but that is a real possibility in the future.
I think everything is still on the table. Its too early in the game to go all-out, one banking lobbyist said.
The American Bankers Association, for one, is pushing for an increased focus on consumer protection within the existing banking regulatory system.
The trade group, which represents more than 95 percent of the industrys $13.6 trillion in assets, has been actively reaching out to its members.
We have very real concerns about the separation of examination and supervision for safety and soundness for consumer protection, ABA chief lobbyist Floyd Stoner said. We view those two as inextricably linked.
The Independent Community Bankers of Americas Steve Verdier agrees.
Weve got grave concerns about it, Verdier said. I think our primary concern is the separation between the consumer side of what a bank does and the safety and soundness side.
Added Consumer Bankers Association President Richard Hunt: We dont like what we see so far.
The enforcement mechanism is basically creating 50 Eliot Spitzers, Hunt said, adding that most of a conference call with 500 CBA members held last Thursday concerned the proposed agency.
One of the hallmarks of banking regulation is making sure that we have consistency, Hunt added.
On Wednesday morning, the House Financial Services Committee is scheduled to hold a hearing on enhancing consumer financial projects regulation.
Consumer advocates argue that the banks appear to be pining for the old days, when the banking regulatory system failed and sparked the economic crisis.
Were starting from a position of saying the status quo has failed us, said Travis Plunkett, legislative director of the Consumer Federation of America.
One reason it appears to have failed is banking regulators seem incapable of understanding until recently that consumer protections are actually very important in protecting the safety and soundness of financial institutions.
In addition, he said, having one agency focused on consumer protections will hold banks to a uniform minimum set of standards and stop them from venue-shopping to find a regulator they like.
The ABAs Stoner said the trade group is holding conference calls with member companies and state associations to keep them abreast of the situation, and it will discuss the issue at its regular monthly meeting of trade groups and in-house company lobbyists on Tuesday.
Both the National Association of Federal Credit Unions and the Credit Union National Association havent yet come out against the agency, but they continue to review the administrations proposal.
NAFCUs Brad Thaler said his trade group is also skeptical of the new agency.
Were wary about an approach to create a broader regulator that may not have an expertise in credit unions, Thaler said.