Administration Sends Congress Consumer Legislation

President Barack Obama walks away from the podium after delivering remarks highlighting innovative non profits programs, Tuesday, June 30, 2009, in the East Room of the White House in Washington. (AP Photo/Pablo Martinez Monsivais)

(AP)

President Barack Obama asked Congress on Tuesday to create a new agency to police the fine print on credit card bills and mortgage documents and determine what fees, penalties and interest rates are fair.

The Consumer Financial Protection Agency would be in charge of regulating credit cards, savings accounts and mortgages in the same way other government agencies regulate the safety of drugs, food and toys.

Obama said Americans are demanding it.

"Those ridiculous contracts with pages of fine print that no one can figure out — those things will be a thing of the past," the president said in a statement accompanying the 152-page draft bill. "And enforcement will be the rule, not the exception."

Republicans and bankers, however, already are balking and gearing up for a fight.

Part of the agency's mission would be to implement new restrictions on credit card companies passed by Congress this spring. That law prohibited arbitrary rate hikes and limited access to cards by minors.

The consumer protection agency also would regulate high-rate "payday loans" and the terms on savings, checking and debit card accounts, including overdraft charges.

Under the plan, lenders would be required to be up front about their products, potentially applying warning labels to risky products like mortgage payments that balloon in the future.

The agency's creation would extend federal oversight to a market that so far has mostly escaped it. Confusing and risky mortgages are blamed for contributing to the housing crisis that roiled Wall Street and resulted in a $700 billion taxpayer bailout for banks.

Democrats in Congress have embraced the idea of a consumer financial watchdog as a way of showing voters they are on their side during tough economic times.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, called the proposal one of his highest priorities and said his panel would consider it in July as part of a broader effort to overhaul federal regulations on the entire financial industry.