The president on Tuesday sent Congress a 152-page bill to create the new agency, a key element in the sweeping overhaul of financial rules the administration unveiled two weeks ago.
Obama says the agency will ensure that consumers are provided with simple, transparent and accurate information on financial products like credit cards and mortgages.
"Those ridiculous contracts with pages of fine print that no one can figure out - those things will be a thing of the past," Obama said in a statement. "And enforcement will be the rule, not the exception."
Treasury Secretary Timothy Geithner said the new agency's one mission will be to protect consumers by giving the new agency "the authority and accountability to make sure that consumer protection regulations are written fairly and enforced vigorously."
The idea has generated sizable opposition from the finance industry which argues that the agency will stifle development of new products. However, the proposal has the backing of key lawmakers including House Financial Services Committee Chairman Barney Frank, D-Mass., and Senate Banking Committee Chairman Christopher Dodd, D-Conn.
In a fact sheet, the administration said the new agency would make sure that financial products include clear information to allow consumers to understand what they are getting when they sign up for a new credit card, take out a mortgage or use other types of financial products.
"By consolidating accountability in one place, we will reduce gaps in federal supervision and enforcement," Geithner said.
The consumer agency is part of what would be the most comprehensive rewrite of the government's financial rules since the 1930s. The administration also is pushing to give the Federal Reserve expanded powers to serve as a systemic-risk regulator for the entire financial system and to boost government powers to wind down the nation's biggest financial institutions if they get in trouble.