The new financial consumer protection agency to be included in President Obama's package of regulatory reforms will have broad powers, covering a variety of products and services, CNBC.com has learned.
The new entity will be called the Consumer Financial Protection Agency, according to the White House proposal, part of which was obtained by CNBC.com. It would have "broad authority" to regulate all providers of financial products and services, be "independent and accountable;" as well as have rule-making and enforcement authority.
"In failing to check widespread abuses in subprime mortgage lending, lax consumer protections contributed significantly to the current financial crisis," the summary reads, "The financial crisis, in turn, revealed inadequacies in consumer and investor protection across a wide range of financial products and markets."
The Obama administration is expected to release full details of its plan on Wednesday, one day before Treasury Secretary Timothy Geithner testifies before the powerful House Financial Services Committee, where the long and complicated process of turning the blueprint into a piece of legislation will begin.
A broad outline of the plan was contained in a Monday newspaper op-ed piece by Geithner and White House economic adviser Larry Summers.
Among other things, it would create a systemic, or super, federal regulator, raise capital and liquidity requirement for firms, impose more oversight over derivatives trading and grant the government so-called resolution authority to deal with big institutions whose failure might threaten the overall economy.
Until now, little has been known about the details of the consumer protection agency.
According to the document it would define standards for "plain vanilla" products, including mortgages.
Despite an apparent emphasis on mortgage industry practices in the agency’s mission statement, its portfolio also covers credit, savings and payment markets.
The CFPA would also seek to increase transparency and disclosure, requiring companies to provide more information on the risks and benefits of the products.
Certain existing industry practices, such as prepayment penalties, would be banned because they can "lock borrowers into bad loans."
It would also have authority to enforce the existing Community Reinvestment Act.
"Financial products are complex, and it is often difficult for even the most financially literate consumers to recognize the risks financial products can present," the outline reads.