Obama warns Republicans on consumer protection row

US Senate Democrats Thursday blocked a Republican bid to amend plans to shield consumers from predatory lending, after President Barack Obama warned the move would "gut" his financial reform bill.

Two Republican senators joined the Democrats to defeat the amendment to legislation that Obama has characterized as the most sweeping regulatory reform since the 1930s, by 61 votes to 38.

Obama did not specifically threaten to veto the bill, before the vote, but aides made clear he would not accept changes to the legislation which he believed would render it toothless.

"Today, the Senate is considering a Republican amendment that will gut consumer protections and is worse than the status quo," Obama said in a written statement.

"I will not allow amendments like this one written by Wall Street?s lobbyists to pass for reform."

Obama had argued that the amendment, introduced by senior Republican Senator Richard Shelby, would weaken consumer protection oversight, include "dangerous carve outs for payday lenders" and other financial services operations.

Payday loans tide a borrower over until they get their monthly salary check, but often come with very high, or confusing interest rates.

"Alternatives that gut consumer protections and do nothing to empower the American people by cracking down on unfair and predatory practices are unacceptable, and I urge the Senate to vote no on weakening consumer protections and instead stand with the American people."

The Shelby amendment would have placed a Division of Consumer Financial Protection within the Federal Deposit Insurance Corporation -- a move that the White House said would weaken its powers and oversight.

Obama envisions a separate Consumer Financial Protection Agency that would have the power to force banks, mortgage companies and finance firms to desist from predatory practices and efforts to confuse clients about conditions of their products.

It would ensure greater transparency on products like payday loans and mortgages.

White House officials said on Thursday that they were increasingly confident that the financial reform legislation would soon pass, following repeated attempts by Republicans to change the language of the bill.

Democrats need to pry at least one vote away from the Republicans on the final passage of the legislation to overcome blocking tactics by the opposition party's leadership.