The new Consumer Financial Protection Agency planned by the White House won’t have the authority to set prices on financial products such as mortgages, Treasury department officials said.
Rather, it will be responsible for preventing the sale of unsuitable mortgages, the Financial Times reported.
The subprime mortgage crisis stemmed largely from consumers buying houses they couldn’t afford.
The Obama administration proposed forming the agency to protect people against mortgage, credit card and other financial abuse.
Many financial service companies and some in Congress, including Democrats, have expressed opposition to the idea. Banks are lobbying hard to either block the formation of the agency or limit its authority.
They don’t want the agency to have the power to make banks and brokers provide simpler mortgages and credit cards.
Lawmakers who oversee the Federal Trade Commission are worried that the plan would weaken the FTC. They recommend devoting more resources to the commission rather than creating a new agency.
Under the new plan, the FTC would lose much of its oversight related to mortgage laws.
Rep. Bobby Rush, D-Ill., chairman of the House Energy and Commerce subcommittee on trade and consumer protections, wants the commission to keep all its authority.
"Looking at all reliable indicators, the commission has performed commendably with a small and scrappy staff and abridged powers," he said at a Congressional hearing Wednesday.
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