By Consumers Union on Friday, July 24th, 2009
Treasury Secretary Tim Geithner said today:
“With great respect to the chairman and other supervisors who are reluctant to do this, they are doing what they should, which is defend the traditional prerogatives of their agencies,” Geithner said. “I think frankly all arguments should be viewed through that prism.”
PIRG gave a Top Ten of reasons to not trust the Fed in their efforts limit the authority of a new CFPA.
Ten reasons to establish a Consumer Financial Protection Agency instead of trusting that the Fed will change into a consumer agency.
1. It ignored the growing mortgage crisis for years after receiving Congressional authority to enact anti-predatory mortgage lending rules in 1994, only issuing final rules in 2008, after the crisis had peaked.
2. It took five years simply to consider credit card disclosure regulation, only adding provisions to ban unfair practices after Congress moved aggressively, and only finalizing rules in December 2008.
3. The Fed has allowed debit card cash advances (“overdraft loans”) without consent, contract, cost disclosure or fair repayment terms. Banks earn an estimated $38 billion in total overdraft fees each year.
4. The Fed is allowing a shadow banking system (prepaid cards), outside of consumer protection laws to develop and target the unbanked and immigrants.
5. Despite advances in technology, the Federal Reserve has refused to speed up availability of check deposits to consumers, even after it successfully campaigned to give banks faster access to our money.
6. The Federal Reserve has supported the position of payday lenders and telemarketing fraud artists by permitting remotely created checks (demand drafts) to subvert consumer rights under the Electronic Funds Transfer Act.
7. The Federal Reserve has taken no action to safeguard bank accounts from Internet payday lenders.
8. The Federal Reserve and other banking agencies have failed to stop banks from imposing unlawful freezes on accounts containing Social Security and other funds exempt from garnishment.
9. According to a 2008 GAO secret shopper study, the regulators have failed to enforce the Truth in Savings Act requirement that banks provide account disclosures to prospective customers. Worse, the Federal Reserve’s 1990s regulation implementing the act encouraged this practice.
9. The Federal Reserve actively and successfully campaigned to eliminate a Congressional requirement that it publish an annual survey of bank account fees.
10. Finally, the Federal Reserve missed or ignored the housing bubble, leading to a world-wide economic collapse, failing its primary duty as a systemic risk regulator. If it cannot do its primary job, why should it be expected to be able to accomplish the secondary job of consumer protection?