Congress may defang consumer agency before first bite

[IDemo]

Source: msnbc.com

updated 5/18/2011 3:05:45 PM ET

Almost a year after Congress created a new federal agency to protect consumers from shady lending practices, there is a move afoot on Capitol Hill to clip its wings before it takes flight.

The Consumer Financial Protection Bureau was one of the most contentious provisions of the sweeping Dodd-Frank financial reform bill enacted in 2010. That 2,000-page legislation was designed to fix many of the regulatory loopholes that allowed big banks to take on too much risk. The aim was to prevent another financial collapse like the Panic of 2008 that produced a massive government bailout, sent the housing market into a tailspin and plunged the economy into a deep recession.

On Wednesday, the CFPB put its toe in the turbulent waters of regulating mortgage loan disclosures, one of the most common consumer credit complaints during the housing boom. The "Know Before You Owe" project will test two prototype forms designed to clearly spell out loan terms when a borrower applies for a mortgage. Over the next few months, the CFPB will test the new forms with consumers, lenders and mortgage brokers and take comments on its website.

"With a clear, simple form, consumers can better answer two basic questions: 'Can I afford this mortgage, and can I get a better deal somewhere else?'" Elizabeth Warren, the White House's special adviser in charge of setting up the CFPB, told reporters.

Read more: http://www.msnbc.msn.com/id/43078110/ns/business-eye_on_the_economy/