Word out of Capitol Hill is that the financial reform package will be put to yet another test by month’s end. Despite intense pressure from the financial services industry, Senate Banking Committee Chair Christopher Dodd (D-CN) plans to include the proposed Consumer Financial Protection Agency (CFPA).  Under the bill, the CFPA would be granted the power to police payday lenders and mortgage companies and enforce rules on credit cards and consumer loans.  The Huffington Post reports, however, that the consumer watchdog isn't likely to be the stand-alone agency, as advocates had hoped.  Rather it would be housed in the Treasury Department.  Nonetheless, it will still meet "the principles of [an] independent agency," says Heather Booth, executive director of Americans for Financial Reform.

Madigan Sharpens Her Message

The way Illinois Attorney General Lisa Madigan sees it, once the bill emerges, the Senate -- like the House -- will be faced with a simple decision: "Are you going to stand up for average consumers?  Or the greed of the big banks?"

While Washington insiders predict that Congress will pass some form of financial reform this year, Madigan and fellow consumer-oriented peers in other states don't believe that the battle over the CFPA is anywhere close to an end. Yesterday, they sharpened their message for reform during a conference call with reporters.  Madigan herself challenged taxpayers to get involved in the fight. "We need to get people to complain," she said during the call, which also included attorneys general Tom Miller of Iowa and Dick Blumenthal of Connecticut. "Members of Congress need to know what's happening back in their states."

"The public and Congress need to understand the impact" of letting Wall Street run wild, Madigan added. While lawmakers here in Illinois have picked up the slack by adopting what she calls "common sense controls" -- like the Credit Card Marketing Act and the Homeowners’ Rights Act -- she cautioned that states can't continue to go it alone. "This has the potential to destroy our entire economy."

Angst On Main Street

As far as Nick Moriarty, the owner of a vintage furniture store in Chicago, is concerned, "nobody is safe.” Moriarty is referring to the bait and switch credit card offers and predatory lending that major financial institutions are peddling to small business owners like himself. Despite boasting an excellent credit rating, he tells us that Citibank recently hiked his interest rate from 9 to 23 percent for no good reason. “I’ve never missed a single payment in my entire life," he said. "I’m the dream financial customer and they still did this to me. " For businesses that carry inventory on credit, an unexpected interest rate hike could spell disaster.

In response, Moriarty, along with Illinois' small-business-oriented Main Street Alliance, is pushing back by calling for a CFPA that would crack down on such practices. The participating small business owners are making clear that they disagree with the U.S. Chamber of Commerce's assertions that a CFPA would stifle lending. Conversely, based on a Main Street Alliance survey of roughly 1,200 business owners -- including Moriarty -- a clear majority (61 percent), report that they see the consumer watchdog as helping to spur growth.

"I don't have the money to hire K Street lobbyists," Mortiary tells us. "But something has to be done to protect small businesses."