July 21, 2010
Consumers Union recommends key areas for new Consumer Financial Protection Bureau to target
WASHINGTON – President Obama today is slated to sign into law a historic bill to overhaul the rules for banks and Wall Street on the heels of the financial crisis that triggered the worst recession since the Great Depression.
One of the most important provisions of the landmark law is the creation of a new Consumer Financial Protection Bureau to protect borrowers from abuses in mortgages, credit cards and other types of loans.
Consumers Union, the nonprofit publisher of Consumer Reports magazine, heartily endorsed the bill and advocated strongly for the new bureau.
Gail Hillebrand, the director of Consumers Union’s Defend Your Dollars campaign for financial reform (www.DefendYourDollars.org), said the consumer watchdog will bring much-needed oversight.
“For the first time ever, there will be a watchdog in Washington dedicated to protecting consumers from financial rip-offs,” Hillebrand said. “Millions of Americans have been hit by shady loans, hidden fees, and surprise rate hikes, and this Consumer Financial Protection bureau will take dead aim at these kinds of problems.”
Pamela Banks, senior policy counsel for Consumers Union, said, “The Consumer Financial Protection Bureau represents a huge, positive change in the way consumers are treated in the marketplace. It’s an enormous victory. It was a monumental task to get this bill passed, but the hard work is just beginning. There will be a tremendous amount of work and vision focused on getting this new watchdog up and running to help consumers.”
In addition to bringing important and needed oversight to mortgages and other consumer loans, Consumers Union recommended four areas for the new Consumer Financial Protection Bureau to target:
Accurate credit reports: Consumers lose economic opportunities when credit reporting files are wrong. The new bureau should bring enforcement actions against big credit reporting agencies that don’t follow the legal standard for correcting mistakes in a credit report, and it could decide that it is an unfair practice to give consumers a different copy of the credit file than the one provided to potential creditors.
Debt collection practices and debt buying: The Federal Trade Commission has called debt collection litigation a “broken system” and reported that debt collectors misuse the courts to collect outdated debt. The CFPB could define debt collection practices which are unfair if the debt started with a financial product or service, such as a credit card.
Payday lending: These lenders trap consumers in a cycle of debt, charging high fees every two weeks to replace one payday loan with another one. The bureau should end the practice of taking a check or access to the bank account as the basis for making a loan – this is like promising your next paycheck before you even receive it.
“Ways to pay”: Consumers shouldn’t face a loss of consumer protections because they pay using a prepaid debit card or a mobile phone, rather than a traditional debit card or a credit card. The bureau could apply existing consumer protections to these consumers.
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