United States Senate
Washington, DC 20510

12 May 2010

OPPOSE CARPER #3949 GIVING NATIONAL BANKS IMMUNITY FROM COMPLIANCE WITH FEDERAL AND STATE CONSUMER PROTECTION LAWS

Don’t Take States and AGs Off The Predatory Lending Beat

Dear Senator:

We write on behalf of Americans for Financial Reform, an unprecedented coalition of over 250 national, state and local groups who have come together to reform the financial industry. Members of our coalition include consumer, civil rights, investor, retiree, community, labor, religious and business groups as well as Nobel Prize-winning economists.  We support a strong Consumer Financial Protection Bureau and oppose weakening amendments to the Restoring American Financial Stability Act, S. 3217.

Carper Amendment #3949 is a stealth attempt to give banks immunity from consumer protection, taken directly from the bank lobbyists’ playbook. If you care more about protecting consumers from bank abuses than you care about protecting banks who are violating the law–you should oppose this amendment. The bill’s enforcement and preemption provisions are already a compromise and must not be weakened further.

1.  Attorney General Enforcement of CFPB Rules:

The amendment would take our state cops off the predatory lending beat.  The CFPB’s authority has already been cut back, and the Carper amendment would leave enforcement for 98% of banks solely in the hands of the bank regulators who failed us in the past.

• Anyone who violates the law should be accountable.  Do not give banks that violate specific CFPB rules a special pass against vigilant enforcement.
• Under another provision of the bill, the CFPB will have no enforcement authority against 98% of banks, making it critical that AGs be able to protect their states’ residents.
• The CFPB cannot be everywhere, protecting consumers in all 50 states, and individuals won’t have a right to enforce the CFPB rules themselves.  AGs need to be able to protect residents in their states.
• Many existing federal laws permit enforcement by state AGs, with no ill effects.
• Before bringing an enforcement action, the bill already requires AGs to consult with the CFPB and bank regulators, and the CFPB may intervene or clarify its rules, ensuring consistency in enforcement standards.
• More law enforcement helps everyone, including honest competitors who follow the rules, have nothing to fear, and might lose business to others who break the rules.

2. Immunity from State Law:

The amendment makes it easier for national banks to ignore state laws that address new bank abuses not yet covered by federal protection – the state laws we need the most.  Preemption prevents states from stopping those abuses before they spread nationally.

• The Senate compromise provision in the bill already gives the OCC, an agency with a history of hostility to consumer protection, far too much power to wipe out state consumer protection laws.  The provision should not be weakened further.
• States are first responders who act first and stop local abuses from spreading to become a national problem.  Their laws are most important when there is a gap in federal law.
• States that adopted tough anti-predatory lending laws before the OCC preempted those laws had lower foreclosure rates than states without those laws.
• National banks made riskier loans after the OCC issued a broad preemption rule.  In 2006, from 32% to 50% of toxic loans, depending on the type, were made by banks and subsidiaries that states could not touch, and that share was growing.
• Preemption favors large national banks and weakens our dual banking system.

Banks – which have opposed stronger consumer protections all along — have identified state attorney general enforcement and preemption of state laws as their key weakening amendments. The banks want to be able to ignore both state and federal law with impunity.  A vote for Carper #3949 is a vote against consumer protection.

In a time of global economic crisis we clearly need more enforcers of consumer protection laws, not fewer.

Sincerely,

Americans for Financial Reform

Our 250 member groups:
http://ourfinancialsecurity.org/about/our-coalition/