Friday, June 25, 2010
Washington, D.C.— House and Senate negotiators today approved the financial reform bill, which includes the creation of a Bureau of Consumer Financial Protection. The new Bureau would oversee consumer financial products such as mortgages, credit cards, and payday loans.
Consumers Union, the nonprofit publisher of Consumer Reports magazine, has been a strong, outspoken advocate for the creation of this bureau to help protect and inform consumers in the financial marketplace.
The overall bill would set up a warning system to minimize financial disruptions, require large financial institutions to liquidate rather than be bailed out by taxpayers, and set new rules for financial procedures and instruments, such as derivatives, that have been largely unregulated. The full House and Senate are expected to vote on the conference committee’s bill next week.
“This bill cleans up the Wall Street mess, but they didn’t forget consumers,” said Pamela Banks, senior policy counsel for Consumers Union. “Consumers have been pounded by the financial crisis, not just from job losses, but from punishing credit-card fees and skyrocketing interest rates. The bill gives consumers a fighting chance. The idea of a consumer watchdog was deemed dead on arrival last fall, but that prediction turned out to be completely, blissfully wrong.”
The new bureau will be housed in the Federal Reserve, and will have an independent director with reliable funding and full rulemaking authority over a broad range of financial products.
“The bureau will provide consumers with timely and understandable information they need to make responsible decisions about their financial transactions,” said Banks. “This really is a victory for any consumer who has ever signed a complicated financial agreement, or been trapped in a costly loan.”
In addition to the consumer bureau, the bill contains several other strong reform measures:
• All consumers will be able to get free credit scores when they are denied credit because of their credit scores.
• The bill puts an end to prepayment penalties for mortgages. Mortgage lenders must determine whether a borrower has the ability repay the loan.
• An Office of Credit Ratings is established to promote accurate credit ratings and ensure these ratings are not unfairly influenced by conflicts of interest, and the bill allows investors to sue credit agencies.
• The Federal Trade Commission (FTC), on an expedited basis, can develop and enforce produce new rules to protect consumers from unfair and abusive auto financing transactions.
• The consumer bureau may prohibit or impose conditions or limitations on the use of arbitration.
• For consumers who have turned to subprime credit cards, car title loans, check cashers and payday loans to make ends meet, the banks have been directed to provide greater access to safe and affordable bank accounts, credit, and financial information.
• The bill contains tough language that brings the derivative market out of the shadows and on to public exchanges.
David Butler or Kristina Edmunson, 202-462-6262