Can 800 Bankers Ever Be Right?
By Consumers Union on Thursday, March 18th, 2010
The banking industry is already lined up to fight this week’s regulatory reform bill. From BusinessWeek Magazine :
About 800 bankers fanned out across Capitol Hill yesterday, pressing lawmakers to resist creation of a consumer-protection office, shield national banks from state laws and maintain Federal Reserve oversight of smaller lenders.
One of their main targets is the CFPA. The Dodd bill provides for the CFPA to be an independent agency housed within the Federal Reserve. We have our problems with the Federal Reserve. Banking regulators turned their back or was slow to act on consumer protection; and it took the Fed over ten years to get credit card reform; and the Fed allowed predatory mortgage lending practices to all but destroy our financial system and push many consumers over the brink into financial disaster. However, under the current Dodd bill the CFPA would have enough autonomy to be effective on behalf of consumers. The banking industry will lobby to transfer more power to the banking regulators over the consumer agency– which would take away the consumer agency’s independence and stifle and/or prevent its ability to protect consumers. We expect the industry to seek amendments that will weaken the consumer agency’s ability to establish meaningful consumer protection rules, conduct examinations, and enforce its laws. The banking industry wants to maintain the status quo. They hate the idea of a watchdog agency overseeing consumer financial products.
We also expect that the banking industry will seek amendments to prevent State’s from protecting their citizens from unfair and abusive financial products and practices. Oftentimes there are better consumer protection laws at the state level than the federal level. Currently, federal law (or the interpretation of federal law by the OCC) blocks states from going after entities that trick, cheat, defraud or scam consumers through bogus or illegal financial transactions. Under the bill, federal law would be the floor (unless the OCC on a case-by-case basis decides otherwise) and states could enforce stronger consumer protection laws. The banking industry hates this provision and will certainly fight to give the OCC more power to prevent states from protecting their citizens.
Mark-up on the bill is scheduled for Monday. The banking industry has vowed to fight this bill. We expect a lot of misinformation and fear mongering from industry. Here in DC, CU is ready for the fight.
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