By: Celia Murray; Columnist

Reading the newspaper or listening to television talking heads, one would think that the only big battle in Washington right now is over health care.  However, another huge fight is brewing.  In late June, the Treasury Department sent to Capitol Hill draft legislation that would create a new Consumer Financial Protection Agency.  According to the draft legislation, this agency’s objective would be to make sure consumers can make informed decisions about financial products and services, protect consumers from abuse, make sure markets operate fairly and efficiently, and ensure that all consumers have access to financial services.  As Treasury Secretary Timothy Geithner said, “This agency will have only one mission – to protect consumers.”
Given the recent history of the financial industry, the creation of such protections seems only logical.  Remember, this is the industry whose greed and extraordinary risks nearly wrecked the economy – the same industry that then had to be bailed out with literally hundreds of billions of taxpayer dollars, money that came from the very people who were victimized by the industry’s gross recklessness.  Needless to say, the financial industry has vowed to fight this plan with everything they have even though the banks are still heavily dependent on taxpayer supported loans and loan guarantees.  “It’s going to be a huge fight,” promised the president of the American Bankers Association.

Many consumer groups strongly support the proposed legislation.  Even a cursory look at industry practices tells why.  In June, Harvard Law School professor Elizabeth Warren told a Congressional committee, “Giant lenders compete for business by talking about nominal interest rates, free gifts and warm feelings, but the fine print hides the things that really rake in the cash. 

Today’s business model is about making money through tricks and traps.”  Warren pointed to credit card contracts as a prime example, noting that the average credit card contract has ballooned from a single page in the 1980s to more than 30 pages today.  “Study after study shows that credit products are designed in ways that obscure the meaning and that trick customers.”  Warren also points to mortgages as another example, concluding, “Mortgage lenders furnish reams of unreadable documents shortly before closing, often leaving people with no practical option but to take whatever terms the lender has filled in.”  Most people don’t realize that the attorney who is at the closing table with them, whose fees they pay, actually represents the lender, not the borrower.

The banks and others will argue that a new agency is unnecessary.  However, existing regulators have authority over only particular kinds of financial institutions.  As the assistant Treasury secretary for financial institutions noted, “The (new) agency will be able to get to the root of the mortgage crisis that we saw in the past.  It will be able to go in to examine, (and) supervise the operations of previously unregulated parts of the sector.”

It is obvious that the financial industry is unwilling to clean its own house.  Credit card companies are busy scrambling to raise interest rates and change terms and conditions before new laws restrict their ability to do so take effect.  Banks are looking to new, sky-high overdraft fees and exploitive overdraft protection plans to pad the bottom line.  The predatory pay-day lenders and title pawn outfits garner huge profits on the backs of the least sophisticated and most vulnerable of consumers.

As New York Times columnist Bob Herbert noted, “There is nothing free or fair about a market in which one side uses double talk and mumbo jumbo to obscure important information and deliberately dupe the other side into making decisions against its own interest.”  Herbert concludes, “The malefactors of great wealth view an informed consumer as Public Enemy No. 1.  The last thing in the world that they want is a fair marketplace, which is why the Consumer Financial Protection Agency can’t come fast enough.”

Celia Murray is a member of the Morgan County Democratic Party.