A consumer advocacy organization is calling on Senate Banking Committee Chairman Christopher Dodd (D-Conn.) to re-affirm his commitment to create an independent consumer financial regulator after the nation’s largest bank announced it would not oppose the agency.
The CEO of Bank of America told President Obama his company does not oppose creation of a Consumer Financial Protection Agency, according to the advocacy group, Consumer Watchdog. Also last week, former Citigroup Chairman John Reed endorsed a consumer regulator in testimony before the Senate banking panel, the organization adds in a statement.
The House last fall approved its financial reform bill, so action now centers on the Senate.
Dodd reportedly has been negotiating with the Banking Committee’s ranking Republican, Sen. Richard Shelby of Alabama over a bipartisan reform proposal. However, Shelby reportedly has rejected creation of a Consumer Financial Protection Agency (CFPA).
Obama has called for creation of such an agency to protect Americans from the kinds of abuses that led to the 2008 financial crisis and resulting economic meltdown.
In its letter to Dodd, Consumer Watchdog wrote: “Abandoning an independent consumer financial regulator is not a small compromise, but an untenable capitulation to those in the financial industry who have no interest in meaningful reform. It would be a disappointing and embarrassing end to more than a year of this committee’s work on a financial regulatory overhaul were you to propose a bill that provides less consumer protection than even the nation’s largest bank is willing to accept.”
Despite the support of the Bank of America and Citigroup chiefs, Consumer Watchdog acknowledges that “much of the rest of the financial industry continues to exert its considerable lobbying muscle to assert that a CFPA would cripple the nation’s economy.”
The powerful pro-business lobby U.S. Chamber of Commerce, specifically, has been working so assiduously against financial reform that Obama singled out that organization by name in a White House speech last year.
Explaining the rationale behind a CFPA, Obama said: “This agency will have the power to make certain that consumers get information that is clear and concise — in plain language — so they can compare products and know exactly what they’re getting themselves into. It will ensure that banks and other firms can’t hide behind these ridiculously confusing contracts pages and pages of fine print that nobody can figure out. It will have the ability to enforce and build on the credit card reforms we passed earlier this year, so that consumers aren’t hit with unfair rate hikes and penalties, or hidden charges. It will require brokers to look out for the interests of families if they give advice about mortgages. And it will ensure transparency and fair dealing for other financial products, like bank overdraft services and payday loans.”
Not only does financial reform require inclusion of a CFPA, according to Consumer Watchdog and others, that agency will require strong, independent authority that includes:
• Independent rulemaking authority;
• An independent budget not solely dependent on appropriations; and
• Examination and enforcement authority.
“Independence is critical to the CFPA’s success. Existing bank regulators have proven their inability to design and enforce fair rules for consumer credit. The result was abusive mortgages that cost families their homes, untold billions in unfair fees, and deceptive contracts that tricked consumers into terms they could not meet,” Consumer Watchdog says in its letter. “Congress have prudential regulators the authority to rein in predatory mortgage lending well over a decade ago, and their failure to act undermined the whole financial system.”
Publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.