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Consumer groups ask questions for new Fed chair nominee

October 24, 2005

Groups call on Senate Banking Committee to gauge commitment of new Fed Chair nominee to policies that protect consumers

WASHINGTON, D.C. – Five leading consumer organizations today urged the Senate Banking, Housing, and Urban Affairs Committee to discuss with Federal Reserve Board chair nominee Dr. Ben Bernanke his commitment to use the Fed’s authority to protect consumers on a variety of issues, including credit card abuses, check holds, unfair mortgage practices, and bank policies in response to disasters.
“The decisions of the Board of Governors of the Federal Reserve Board, and the leadership and views of its Chairperson, influence consumers’ well-being in the financial marketplace,” the groups said in a letter to the committee leadership.
The signatories – Consumers Union, U.S. PIRG, National Consumer Law Center, Consumer Action and Consumer Federation of America – called on members of the Banking Committee to ask Dr. Bernanke to take a stance on key Fed issues that impact consumers. The groups asked the Senate panel to question the nominee about these steps that the Federal Reserve Board could take to protect consumers:
• Reduce check hold times – Reduce as much as feasible the current delays before banks must make funds available from a deposited check. Check clearing is speeding up, but check holds have remained the same. This increases the risk of a consumer bouncing a check and paying higher fees.
• Protect all debit cards holding significant household funds – Extend legal protections under the Electronic Fund Transfer Act (EFTA) to debit cards that are used to deliver payroll, emergency benefits, and other funds significant to a household. Of particular importance is placing a limit on loss of funds from unauthorized transactions.
• Credit cards – Use the regulatory power of the Federal Reserve Board to curtail practices by credit card issuers that harm consumers, such as universal default clauses, high fees, and credit limits that outstrip the ability to pay.
• Change overdraft policies – Require banks to provide consumers with the true cost of bounce protection loans before the consumer incurs the fees.
• Adopt proactive policies for future disasters – The Federal Reserve Board can take an active role to better prepare the U.S. financial system for future disasters, including establishing a comprehensive set of best practices and developing information for the public about federally chartered and federally insured financial institutions compare to the best practices and to one another when a disaster strikes.
• Stop abuses in mortgage lending – The Federal Reserve Board has the power to define certain mortgage lending abuses as unfair or deceptive practices as a tool to help police the marketplace for subprime loans.
• State consumer protection law and state law enforcement – Question the nominee on his recognition of the value and role of state consumer protection laws and state law enforcement as applied to federally-chartered financial institutions.
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Gail Hillebrand, 415-431-6747
Click here for the letter to the Senate (PDF format).