WASHINGTON — At yesterday's hearing on financial regulatory reform, Chris Stinebert, president and CEO of the American Financial Services Association (AFSA), told the House Committee on Financial Service that the proposal to create a consumer financial protection agency would impose a new tax on consumers at a time when they are least able to afford it.

Under the proposal, the Consumer Financial Protection Agency (CFPA) would provide consumer protection oversight for all financial products and services. The agency would be funded by assessments on financial services providers that undoubtedly will be passed on to consumers, said Stinebert. The funding needs could be “staggering” given the proposed agency’s vast scope, he added.

“Congress should think carefully about setting up a new government agency that would cost taxpayers more money at a time when they are already struggling to stay afloat financially,” Stinebert said.

Instead, lawmakers should allow time to evaluate the effects of other government initiatives, he said, as well as implement national preemptive standards that make current and future consumer protection rules apply to all financial services providers. AFSA’s other recommendations include pursuing a regulatory structure that houses prudential and consumer protection oversight within a single regulator and providing additional resources that permit existing regulators to step up enforcement of consumer protection laws.

Stinebert also advocated preserving the charter for industrial loan banks, “which provide a safe, sound and appropriate means to deliver financial services to the public and have not been part of the problem.”

AFSA is concerned about the proposed agency’s effects on innovation, said Stinebert. “With its vast, unfettered authority, the proposed regulator has the potential to roll back the clock 30 years, when consumers had only standard, ‘plain vanilla’ borrowing options,” he stated.