Cause and Effect in European Politics and Law

The US is creating a mechanism for consumer protection when using financial services

Adelina Marini, May 21, 2009

Against the background of the discussions about quick economic recovery as well as the academic disputes about the roots of the crisis, in Washington is being held a discussion about the establishment of a regulatory commission that would have broad authority to protect consumers who use financial products as varied as mortgages, credit cards and mutual funds, Washington post newspaper reports, quoting different sources, familiar with the discussions.

The proposed commission would be one of the administration's most significant steps yet to overhaul the financial regulatory system. In fact this was one of the requirements of some European leaders, most avowed of which the French president Nicolas Sarkozy and the German chancellor Angela Merkel. Both insisted at the G20 summit in London and before that that entirely new financial architecture was needed and pointed out the need of more regulation in the US.

According the Washington post sources, talks have begun with industry officials, lawmakers and other financial experts about the proposal, which would require legislation. At the moment responsibility for regulation of consumer financial products is distributed among a patchwork of federal agencies. Some of these regulators regard consumer protection as a low priority. And some financial products are not regulated at all, says WP. With the new proposal the implementation of the existing legislation would be centralised and would create a vehicle for imposing tougher rules.