NEW YORK — Of all the financial regulatory changes the Obama administration has proposed, one stands tallest as a threat to bank industry profits: the creation of an agency to protect consumers from risky products.

Banking lobbyists are already trying to curb the agency, which is fast becoming the first big battleground of the financial overhaul. But it's up against an industry with a track record of staying one step ahead of regulators.

If approved by Congress, the Consumer Financial Protection Agency could curtail or ban a host of dubious — but lucrative — bank practices such as ballooning mortgages, excessive credit card interest rates and surprise overdraft fees.

The administration says such safeguards could have minimized the recent economic meltdown's damage. But a concerned banking industry is taking aim at the proposed watchdog.

Saying they're being unfairly cast as the villains, banks fear a new agency would create conflicting layers of regulation — and give outsiders broad sway over their products and services.

"We think this agency is a mistaken piece of the overall program and not something that needs to be done," said Wayne Abernathy, who heads financial institutions policy at the American Bankers Association. "This agency is going to be deciding what products we should offer instead of our customers telling us what they want."

Abernathy said his group, which represents most of the nation's estimated 8,000 banks, will push the administration to "replace" the agency with another entity.

In response, about 200 consumer protection groups are joining forces to defend the proposed agency. Their success or failure could determine how sweeping and long-lasting the financial overhaul turns out to be.

Most industry objections ignore the problems exposed by the financial crisis, said Elizabeth Warren, head of a congressional panel overseeing the financial bailout and a key architect of the consumer agency.

Industry advocates say the agency will create a conflict between the goals of traditional regulators (to safeguard the banking system) and consumer regulators (to monitor the products). They say the two sides might disagree on whether a product is good for both consumers and banks.

"And there's no way to know who would win out," said Scott Talbott, a lobbyist with the Financial Services Roundtable, which represents the biggest U.S. financial firms. "If they couldn't agree, no one would win."

Consumer advocate groups reject the gridlock claim.

"This is the exact same industry that used those arguments to bring our economy to a screeching halt," said Kathleen Day, a spokeswoman for the Center for Responsible Lending. "It's not patchwork (regulation). It's checks and balances."