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Federal legislation intended to add new protections for financial products is drawing some opposition from banks and financial planners, but support from consumer advocates who say the safeguards are needed.
"Consumers need protection from unfair practices that left consumers to fail and companies to crumble but protected the banks too big to fail," said Fielding Huseth, an advocate for the Maryland Public Interest Research Group.
The Consumer Financial Protection Agency Act, which would give the agency authority to write and enforce rules for all financial products, is part of President Barack Obama's financial reform package that has been fought by big banks, the U.S. Chamber of Commerce and major Wall Street players.
The proposed agency would be able to regulate products ranging from credit cards to payday loans at banks and other financial companies, which are currently regulated by a "hodge podge" of federal and state regulators, Huseth said.
Smaller banks and credit unions would be exempt from most of the proposed changes.
While the proposed reforms are some of the most sweeping ever considered, they are getting scant attention in the media and even among financial services trade groups, said Craig Berman, a certified public accountant and lawyer in Timonium who also serves as the government relations committee chairman of the Financial Planning Association of Maryland, a trade group.
"Like most of the public, I don't know much about it," Berman said.
His worry is that the proposed agency's powers will continue to expand to cover every financial product on the market, Berman said.
"Whenever government gets bigger, you wonder how far it'll go," Berman said. "Trying to put politics aside, if you're afraid of government and Uncle Sam, then I can see why you'd be worried."
Supporters of the proposed changes say they are needed to protect consumers, which existing bank regulators have not been pursuing, but critics say the changes will hurt the financial institutions and are already leading to a rise in credit card rates and other banking fees.
"Big banks had said in the '30s the [Federal Deposit Insurance Corp.] would hurt banks, and of course, for the past 60 years, it hasn't, and has been important for consumer protection," Huseth said.
Community banks "remain committed to serving their customers in a fair and honest manner," and any additional regulations should be focused on the "too-big-to-fail institutions that caused this financial crisis," said R. Michael Menzies, chairman of the Independent Community Bankers of America and president and CEO of Easton Bank and Trust Co. in Easton.
An amendment exempts community banks with assets of less than $10 billion from direct examination by the proposed agency and from fees to fund it, he said.
But Menzies' organization also urged Congress to narrow the scope of the proposed agency even further.
Thomas D. Murphy, president of EagleBank of Bethesda, said he thinks the public has concerns about the major financial institutions, even though they have strong confidence in community banks such as his.
"People have made a distinction between the big banks and the community banks," Murphy said. "People aren't holding what happened to the big banks against us. People feel the smaller banks are better managed and don't have the runaway problems, be it compensation or lack of oversight."
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