Meltdown 101: Reform Plan's Impact on Consumers

American consumers have fallen victim to one financial scandal after another in the past decade, from accounting fraud at Enron to illegal late trading by mutual funds to the subprime mortgage meltdown.

President Barack Obama hopes to put the brakes on that trend with a series of regulatory reforms that his administration says will guard the nation's financial system against its own excess. The formal announcement comes Wednesday, but much of the substance was disclosed by the administration on Tuesday.

The centerpiece of the package is the creation of a new agency, and there also are proposals to protect people who have mortgages or use credit cards.

Here are some questions and answers about the proposed reforms and their likely impact on consumers.

Q: What's being created and why?

A: The Consumer Financial Protection Agency, if approved by Congress, will have broad authority to protect consumers of credit, savings, payment and other consumer financial products and services. It would be independent of agencies that now share those oversight duties and take away some power from some, most notably the Federal Reserve.

It's being proposed in response to widespread criticism that banks, lenders and credit card companies have used unfair and deceptive practices to dupe consumers and saddle them with debt.

Q: What exactly would the new agency be able to do?

A: It could write rules, reform mortgage laws, examine financial institutions' practices, enforce compliance through penalties, ban unfair practices and require that companies be "clear and conspicuous" in informing consumers of costs, penalties and risks. It also would allow states to pass laws that are stricter than the federal standards.

One signal that administration officials are determined not to let this be just another layer of bureaucracy and complexity: their use of the term "plain vanilla." The agency would require banks and other financial institutions to offer a basic, "plain vanilla" mortgage product with straightforward terms — such as a 30-year, fixed-rate mortgage loan.