Obama details plan for financial agency

The Consumer Financial Protection Agency would be in charge of regulating credit cards, savings accounts, and mortgages in the same way other government agencies regulate the safety of drugs, food, and toys.

Obama said Americans are demanding it.

“Those ridiculous contracts with pages of fine print that no one can figure out - those things will be a thing of the past,’’ the president said in a statement accompanying the 152-page draft bill. “And enforcement will be the rule, not the exception.’’

Republicans and bankers, however, already are balking and gearing up for a fight.

Part of the agency’s mission would be to implement new restrictions on credit card companies passed by Congress this spring. That law prohibited arbitrary rate hikes and limited access to cards by minors.

The consumer protection agency also would regulate high-rate “payday loans’’ and the terms on savings, checking, and debit card accounts, including overdraft charges.

Under the plan, lenders would be required to be up front about their products, potentially applying warning labels to risky products like mortgage payments that balloon in the future.

The agency would extend federal oversight to a market that has mostly escaped it. Confusing and risky mortgages are blamed for contributing to the housing crisis that roiled Wall Street and resulted in a $700 billion taxpayer bailout for banks.

Democrats in Congress embraced the idea of a consumer financial watchdog to show voters they are on their side during tough economic times.

Representative Barney Frank, a Democrat from Massachusetts who is chairman of the House Financial Services Committee, called the proposal one of his highest priorities and said his panel would consider it in July as part of a broader effort to overhaul federal regulations on the entire financial industry.

Senator Chris Dodd, a Connecticut Democrat, vowed to steer the proposal through the Senate Banking Committee he chairs despite staunch opposition from the banking industry. “It’s unbelievable some of the same irresponsible actors that helped create the current financial mess would argue we’re doing too much for consumers.’’

Republicans and financial executives counter that setting strict rules on the consumer market will limit options for buyers and potentially increase the cost of financial products as banks try to make up for lost revenue.

Representative Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee, said the bill could give consumers a false sense of security when it comes to selecting financial products.

Elizabeth Warren, a Harvard University professor and longtime advocate of a consumer-protection agency, said she envisions a system allowing products to remain available as long as lenders are up front and concise about their terms.