The core idea behind the proposal, supporters say, is to pull together consumer oversight powers that are now scattered among various agencies, and to put consumer interests where they should be -- much higher on the priority list than they were during the years leading up to the housing and credit bubble and bust.
Banking and mortgage trade group leaders generally agree that the existing regulatory system failed badly -- for consumers and the industry itself.
"Are reforms needed? Yes, absolutely. We're in favor of better consumer protection," says Anne Canfield, executive director of the Consumer Mortgage Coalition, a trade group that represents major mortgage originators and banks. How to go about achieving those reforms is where Canfield's group and others part company with the administration and consumer supporters.
Canfield and other industry lobbyists are concerned about any radical shakeup of the way banks and mortgage companies traditionally have been overseen by the federal government. Currently the regulators responsible for checking on banks' "safety and soundness" also are empowered to look for risky, discriminatory or anti-consumer practices and products at those institutions.
Handing over consumer protection and enforcement powers to a separate agency that might not understand the business side of the ledger could be burdensome for lenders, they argue, and could add extra layers of bureaucracy and nightmarish legal liabilities. Mortgage Bankers Association President John Courson says the CFPA could "stifle innovation" and limit consumers' choices in home loans and other financial products.
But proponents such as Harvard Law School professor Elizabeth Warren say the industry's criticisms about stifling consumers' choices and reshaping banking industry regulation are simply efforts to preserve the status quo.
"If the status quo is about choice," asks Warren, "then explain why half of those (consumers) with subprime loans 'chose' high-risk, high-cost loans when they qualified for prime mortgages. The truth is no consumer 'chose' to accept the tricks and traps buried in the legalese of financial products," she says -- they were steered to those loans by lenders, brokers and Wall Street promoters who were not required by regulators to explain the risks to their customers.
Outlook for the bill: Passage in the House appears likely. Count on the banks to mount their biggest battles in the Senate.