Meanwhile, the OCC is spending government money lobbying against other parts of the government in an attempt to save itself from being shut down. After a decade of ignoring the abusive and risky practices of its regulated entities and their non-bank subsidiaries while aggressively trying to stop state attorneys general from enforcing state laws against the same, the OCC wants lawmakers to believe that it should be trusted to look out for consumers' best interests. More on this at Banking Law Prof Blog.
Saturday, September 26, 2009
Not down with OCC...
Barney Frank is introducing a bill to create a lamer version of the Consumer Financial Protection Agency than was originally proposed. It would exempt several non-bank institutions, such as automobile financing lenders and real estate brokers, from oversight. This is really sad because these are the types of lenders that have never been subject to federal oversight and which played a large part in getting us into this mess. Also, they won't require banks to offer traditional financial products in addition to more confusing and expensive "innovative" products. Boo.
Meanwhile, the OCC is spending government money lobbying against other parts of the government in an attempt to save itself from being shut down. After a decade of ignoring the abusive and risky practices of its regulated entities and their non-bank subsidiaries while aggressively trying to stop state attorneys general from enforcing state laws against the same, the OCC wants lawmakers to believe that it should be trusted to look out for consumers' best interests. More on this at Banking Law Prof Blog.
Meanwhile, the OCC is spending government money lobbying against other parts of the government in an attempt to save itself from being shut down. After a decade of ignoring the abusive and risky practices of its regulated entities and their non-bank subsidiaries while aggressively trying to stop state attorneys general from enforcing state laws against the same, the OCC wants lawmakers to believe that it should be trusted to look out for consumers' best interests. More on this at Banking Law Prof Blog.
Friday, August 21, 2009
CFPA Roundup
The federal legislature has yet to take any action on the proposed Consumer Financial Protection Agency, which would protect consumers from dangerous financial products (like the Consumer Product Safety Commission that we have for toys, appliances, etc). (Click here for a video of Harvard Law Professor Elizabeth Warren, discussing the proposed agency which was, coincidentally, her idea).
The reason for the delay is that the large banks- with the help of billions of dollars of taxpayer money- are lobbying hard against the proposed agency. (see this Center for Responsible Lending rundown/debunking of the arguments that the financial services industry is using to oppose the consumer protection agency, which - unsurprisingly - require you to conveniently disregard the events of 2007 through the present).
The bank lobbyists are pleased to have the help of federal bank regulators in opposition to the agency. Because they've all done such a good job protecting consumers and they don't want another agency coming in (that would actually be focused on consumers AND have enforcement powers) to step on their toes. The Treasury Secretary is less than impressed.
Now, 24 State Attorneys General have entered the debate. They sent a letter to Congress urging the creation of a CFPA. Here's an exerpt:
What the letter doesn't really say is that the AG's have been getting sick and tired of federal regulators trying to prevent them from enforcing their state consumer protection laws. Instead it is very positive and forward-thinking. Maybe Congress will listen?
The reason for the delay is that the large banks- with the help of billions of dollars of taxpayer money- are lobbying hard against the proposed agency. (see this Center for Responsible Lending rundown/debunking of the arguments that the financial services industry is using to oppose the consumer protection agency, which - unsurprisingly - require you to conveniently disregard the events of 2007 through the present).
The bank lobbyists are pleased to have the help of federal bank regulators in opposition to the agency. Because they've all done such a good job protecting consumers and they don't want another agency coming in (that would actually be focused on consumers AND have enforcement powers) to step on their toes. The Treasury Secretary is less than impressed.
Now, 24 State Attorneys General have entered the debate. They sent a letter to Congress urging the creation of a CFPA. Here's an exerpt:
"Maximizing compliance with these rules through enforcement by both federal and state officials will promote honest competition and reward compliant businesses, while deterring potential violators. Early detection and swift action to stop fraudulent practices can protect competitors from the pressure to adopt abusive but profitable practices before they spread in a race to the bottom. The availability of a nationwide network of enforcement agencies ready to take action, if necessary, will deter violators and encourage honest competitors who do not need to break rules to win customers."
What the letter doesn't really say is that the AG's have been getting sick and tired of federal regulators trying to prevent them from enforcing their state consumer protection laws. Instead it is very positive and forward-thinking. Maybe Congress will listen?
Thursday, July 2, 2009
Another Glimmer of Hope
State Attorneys General won against national banks in a consumer protection case?
Amazing!
A federal agency's interpretation of a law that it administers was shot down under Chevron deference?
No way!
Scalia wrote the opinion?
Aaaa!
It's a big week.
Read Cuomo v. Clearinghouse Association here and a recap by SCOTUSBlOG here.
Amazing!
A federal agency's interpretation of a law that it administers was shot down under Chevron deference?
No way!
Scalia wrote the opinion?
Aaaa!
It's a big week.
Read Cuomo v. Clearinghouse Association here and a recap by SCOTUSBlOG here.
Sunday, June 21, 2009
Presidential Address On Consumer Financial Protection Agency
Here's a link to the President's address on the Consumer Financial Protection Agency.
An excerpt:
"I welcome a debate about how we can make sure our regulations work for businesses and consumers. But what I will not accept – what I will vigorously oppose – are those who do not argue in good faith. Those who would defend the status quo at any cost. Those who put their narrow interests ahead of the interests of ordinary Americans. We’ve already begun to see special interests mobilizing against change. "
Who are the special interests that he refers to? U.S. PIRG's Consumer Blog names some names.
An excerpt:
"I welcome a debate about how we can make sure our regulations work for businesses and consumers. But what I will not accept – what I will vigorously oppose – are those who do not argue in good faith. Those who would defend the status quo at any cost. Those who put their narrow interests ahead of the interests of ordinary Americans. We’ve already begun to see special interests mobilizing against change. "
Who are the special interests that he refers to? U.S. PIRG's Consumer Blog names some names.
Friday, June 19, 2009
Is it time to be optimistic yet?
It's official, the Administration's Financial Regulatory Reform plan includes what consumer advocates have been referring to as a Financial Product Safety Commission.
It's the third point in the official plan available at this Treasury Website for the Regulatory Reform initiative or at financialstability.gov, and they're calling it a "Consumer Financial Protection Agency." Obama has been using Warren's exploding toaster/mortgage analogy (they can both cause you to lose your house!), so I wonder why the plan wouldn't adopt her corresponding Consumer Product Safety Commission/Financial Product Safety Commission analogy.
Anyway, the name is less important than the details of what this agency will do. That includes setting baseline standards for consumer financial products, such as verification of a borrower's ability to pay, banning methods of broker compensation that create an incentive to rip people off, and requiring that borrowers who qualify for prime products "opt out" before they are sold an "alternative" product. Most notably, the consumer protection standards set by the agency will be a floor, not a ceiling. That means that those states which go further to protect consumers won't be preempted by federal law.
Obviously, the banking industry is opposed to this. I have heard the Financial Services Roundtable and the American Bankers Association on NPR over the last couple of days saying that we don't need a new agency to protect consumers because lenders have an incentive to act in the consumers interest in order to protect the institution's reputation, and that imposing any standards on financial products will "stifle innovation." These arguments show that either: (1) the financial services industry has a very short memory, or (2) they are hoping Congress does.
Turning back to the plan- it gets even better! The OCC and OTS would be eliminated, so that banks won't be able to shop around for the regulator who will treat them the most favorably and aggressively shield them from the enforcement of state law.
It's a beautiful thing.
It's the third point in the official plan available at this Treasury Website for the Regulatory Reform initiative or at financialstability.gov, and they're calling it a "Consumer Financial Protection Agency." Obama has been using Warren's exploding toaster/mortgage analogy (they can both cause you to lose your house!), so I wonder why the plan wouldn't adopt her corresponding Consumer Product Safety Commission/Financial Product Safety Commission analogy.
Anyway, the name is less important than the details of what this agency will do. That includes setting baseline standards for consumer financial products, such as verification of a borrower's ability to pay, banning methods of broker compensation that create an incentive to rip people off, and requiring that borrowers who qualify for prime products "opt out" before they are sold an "alternative" product. Most notably, the consumer protection standards set by the agency will be a floor, not a ceiling. That means that those states which go further to protect consumers won't be preempted by federal law.
Obviously, the banking industry is opposed to this. I have heard the Financial Services Roundtable and the American Bankers Association on NPR over the last couple of days saying that we don't need a new agency to protect consumers because lenders have an incentive to act in the consumers interest in order to protect the institution's reputation, and that imposing any standards on financial products will "stifle innovation." These arguments show that either: (1) the financial services industry has a very short memory, or (2) they are hoping Congress does.
Turning back to the plan- it gets even better! The OCC and OTS would be eliminated, so that banks won't be able to shop around for the regulator who will treat them the most favorably and aggressively shield them from the enforcement of state law.
It's a beautiful thing.
Monday, June 15, 2009
Financial Product Safety Commission
We regulate all other consumer products to protect consumer safety- toasters, cars, food and drugs. Why not financial products? A negatively amortizing exploding option ARM with a prepayment penalty can do as much damage to you and your family as an exploding toaster, if not more. The great idea for a Financial Product Safety Commission- championed by Harvard Law Professor (and head of the Congressional Oversight Panel for the bailout money) Elizabeth Warren- looks like it is starting to gain some ground! Check out the Washington Post article here.
Wednesday, June 10, 2009
Ex-employees of Wells Fargo come clean
For years, consumer advocates have been bringing attention to the problem of "reverse redlining"- the practice of steering people of color towards high-cost subprime loans when they qualify for more traditional or more affordable loan products.
The City of Baltimore's fair lending lawsuit against Wells Fargo has produced some interesting affidavits from former employees of Wells Fargo. The former employees talk about the tactics used to encourage people of color to choose subprime or no-documentation loan products; the practice of loan officers falsifying loan applications to put borrowers into certain products; the practice of targeting borrowers through Black churches, and outright use of racial slurs around the office.
Read about it at the New York Times, Baltimore Sun, or Public Citizen's Consumer Law and Policy blog.
It is worth noting that state attorneys general may have been able to investigate and uncover lending discrimination by Wells Fargo if not for the Office of the Comptroller of Currency's aggressive assertion of preemption (the OCC opposes any state attempt to investigate the books of a national bank or its operating subsidiary.)
The City of Baltimore's fair lending lawsuit against Wells Fargo has produced some interesting affidavits from former employees of Wells Fargo. The former employees talk about the tactics used to encourage people of color to choose subprime or no-documentation loan products; the practice of loan officers falsifying loan applications to put borrowers into certain products; the practice of targeting borrowers through Black churches, and outright use of racial slurs around the office.
Read about it at the New York Times, Baltimore Sun, or Public Citizen's Consumer Law and Policy blog.
It is worth noting that state attorneys general may have been able to investigate and uncover lending discrimination by Wells Fargo if not for the Office of the Comptroller of Currency's aggressive assertion of preemption (the OCC opposes any state attempt to investigate the books of a national bank or its operating subsidiary.)
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