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Consumers Union Testifies about FTC’s relationship to the proposed CFPA

The current regulatory structure for financial products and services does not work

Wednesday, July 8, 2009

Consumers Union Testifies for Consumer Financial Protection Agency at Congressional Hearing

WASHINGTON, D.C. – Gail Hillebrand, the director of Consumers Union (CU)’s financial services campaign, will testify in favor of the creation of a Consumer Financial Protection Agency today at a congressional hearing on how the agency would impact consumers as well as the Federal Trade Commission (FTC), the agency that has historically been charged with promoting consumer protections in the nonbanking part of the marketplace.

CU, the nonprofit publisher of Consumer Reports magazine, has long advocated for a federal agency that is specifically responsible for protecting Americans in the financial services market, focusing on unfair and deceptive practices by lenders, banks, and other financial service providers. The Obama administration recently proposed the new agency as part of an overhaul of financial oversight.

In her testimony today before the House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection, Hillebrand will tell lawmakers that this new agency will help consumers, family budgets, and the U.S. economy. She will speak in favor of a strong Consumer Financial Protection Agency and a robust FTC.

“The current financial crisis was sparked by home loans that were poorly underwritten,” Hillebrand says. “Federal regulators failed to stop unfair and deceptive lending practices before the mortgage foreclosure crisis spun out of control and undermined the whole economy. We need a Consumer Financial Protection Agency because our current regulatory structure for financial products and services doesn’t work.”

This agency, Hillebrand says, would be charged with predicting and preventing harm to consumers from banking and credit practices.

“Right now, the government’s oversight of financial products is divided among at least six different agencies,” Hillebrand says. “This proposal would give one federal agency the job of writing the rules for a fair financial services marketplace. The rules would come from this single agency, no matter what type of business provides the product or which federal statute the rules come under. One rulemaker, many law enforcers — that is the model for this new agency.”

Hillebrand says that CU and other consumer groups support the creation of this new agency as well as a strong FTC. The administration’s proposal, she says, effectively provides for both.

“This proposal draws sensible lines between the authority to be transferred to this new agency and the authority retained by the FTC,” Hillebrand says. “The proposed changes are not a reflection on the performance of the FTC. In fact, the FTC has been more aggressive in engaging in open, public enforcement of consumer laws compared to banking regulators such as the Office of Comptroller of the Currency or the Office of Thrift Supervision. This restructuring simply stems from the need to have one agency that has the authority and breadth of jurisdiction necessary to police competing financial products that are offered by different types of providers or fall into different legal categories.”

Media Contact:
David Butler or Kristina Edmunson, 202-462-6262

Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.