The fight for real consumer protection starts now
- March 15, 2010
- 1 comments
- Posted in Banks & Banking, Consumer Rights, Government, Latest Posts
There’s a point where a weak Consumer Financial Protection Agency would be worse than no agency at all. So far, the watered-down Senate bill remains on the right side of the line. But there might come a point where we all have to stand up and shout “no.”
For consumers, nothing—nothing—is more important than having an agency that’s independent. And independence is just what the Republicans and some bank-friendly Democrats hope to prevent. If they can hogtie the agency’s freedom to act, they can put consumers back into the basement and let us rot.
The dream of an entirely separate CFPA appears to be dead. The so-called compromise, with Republicans who will vote against the bill anyway, is for a consumer protection “bureau,” housed in the Federal Reserve.
Yes, that’s the very Federal Reserve that—during the bubble—refused to enforce its own rules against predatory mortgage lending and credit card abuse. When the financial system blew up in its face, it wrote weak new rules, too little too late.
The Fed governor who oversees the Fed’s current consumer protection non-activities is Elizabeth Duke, who formerly chaired the board of directors of the American Bankers Association. No wonder bankers have had their way. She sees through their eyes, not the customers they’re preying on.
Democrat Chris Dodd is expected to report this new Consumer Financial Protection Bureau out of the Senate Banking Committee today, as part of the larger financial reform bill.
On paper, such a bureau could be reasonably effective even within the Fed. The Dodd version gives the bureau autonomy, separate funding, the ability to write consumer-protection regulations and pretty good enforcement tools. It also gives it power over nonbank financial institutions, such as credit bureaus, debt collectors, mortgage lenders and payday loan companies.
But the vital point isn’t having a new bureau, it’s having a new bureau with the authority to enforce its rules. The R’s and conservative Dems such as Tim Johnson, the senator from Citibank, want to give banking regulators the right to veto any new consumer-friendly rules.
Yes, those are the same financial regulators who protect abusive acts by national banks, by preventing state attorneys general from bringing suit themselves. Opponents of the bureau seem especially interested in preventing it from enforcing rules again payday lenders (the lenders that charge effective interest rates in the three- and even four-digit range).
“The veto is the line,” says Travis Plunkett, who directs Federal legislative and regulatory efforts for the Consumer Federation of America. A veto passed by the Senate might be direct—effectively requiring the consumer bureau to get permission from the bank regulators to act (fat chance). Or indirect, by putting the bureau under the thumb of the Fed’s Board of Governors (we’ve already seen what happens then).
Either way, it would create a new, ineffective consumer regulator–the worst outcome of all. That would stop other federal agencies from helping consumers even if they wanted to.
If the Senate Dems accept a veto, the progressives and consumer groups would all rise up. They’d hold it against every legislator up for reelection. Abandoning the fight against financial abuse, when we’ve come this far, would be a shameful act.
I
Tags: consumer financial protection agency
I have never viewed a loan in any other way than as a legal affair where you, the recipient are the plaintiff who will pay hard for lack of a professional defense. Debtors must be the game that banks make prey of.