Crusading FTC faces financial reforms set

By Diane Bartz - Analysis

WASHINGTON (Reuters) - A White House plan to create a new U.S. agency to enforce consumer protection rules for banks and mortgage lenders is a bitter pill for the Federal Trade Commission, which had sought more power to fight financial fraud, but could now see the proposal taken away altogether.

The FTC, which enforces antitrust and some consumer protection laws, is one of six federal regulators that will be affected by the proposed Consumer Financial Protection Agency. The new agency would fight abusive practices employed during the recent housing and credit boom such as poor mortgage loan disclosures and "fee traps" on credit cards.

"Every power that this (proposed) agency has comes from somebody else and that means turf war," said Scott Talbott, chief lobbyist for the Financial Services Roundtable, which represents 100 major financial services organizations.

"I think that there is a political wind to create this agency," he said, arguing for a bill that would put consumer protection and bank solvency under the same agency.

Created in 1914 as a trust-busting agency to prevent unfair business competition, the FTC also pursues consumer-oriented scams such as hidden fees in prepaid calling cards, credit repair scams and fake foreclosure prevention schemes.

FTC Chairman Jon Leibowitz said that there were details to work out in how the new agency would work, if it is created.

"We applaud the president's efforts," Leibowitz told Reuters. "What he wants to do is far better than the status quo."

The Obama administration's legislative plan, if approved, would mean a loss of prestige for the FTC. Agency chairman Leibowitz went before a congressional panel on March 31 to ask for expanded power to bring civil penalties for deception or other misdeeds in financial services.