WASHINGTON — The new consumer agency will focus on stronger across-the-board, not targeted, regulations that will make the credit market function better and protect consumers, the agency's chief architect Elizabeth Warren said last Thursday.
"Targeted rules don't fundamentally change credit markets," she said at the annual meeting of the Consumer Federation of America.
Warren, who is setting up the agency that will begin operating as part of the Federal Reserve next July 21, said the goals will be to create a regulatory framework that will fix a consumer credit marketplace that is essentially broken.
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"Too many creditors use complex forms so it is harder to determine prices at the beginning of the transaction," she said.
Though the financial overhaul legislation that created the consumer bureau gave it far-reaching powers, Republicans who will control the House next year have promised to watch it closely and try to limit its reach.
Before Warren addressed the group, Rep. Randy Neugebauer, a senior member of the Financial Services Committee told the group that his panel would "carefully watch the implementation of the rule-making process."
Neugebauer (R-Texas) said the new bureau has "very, very broad powers." He added that even if they try, regulators can't take all the risk out of the marketplace.
Warren said an effective policy model is the CARD Act, which Congress passed last year to overhaul credit card rules. She praised it for making cards safer for consumers and making it harder for issuers to hide costs. But she noted that lawyers for card issuers are already finding ways to circumvent the law and that "disclosure has been a code word for obfuscation."
But Neugebauer, a former community bank executive, said the key to an improved marketplace is not necessarily more regulation, instead having regulators "doing what they are tasked to do." This could be difficult, he argued, because the financial overhaul bill increased the workload for regulators. He cited a study by the law firm Davis Polk that the law requires 243 new sets of rules.
Warren made a pro-business case for stronger regulations. She said they will help those financial institutions that issue credit products that are appealing to consumers.
"When competitors can obscure the price of credit, companies that make cheaper or better products can't compete," she said.
Warren also said though the creation of the new bureau was a victory for consumers, there are many difficult fights ahead. "Goliath lost, but unlike the Bible, this is not a one-round fight," she quipped.
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