For Immediate Release
February 28, 2010

Banking committee Chairman Dodd has prepared an outline setting out a revised proposal for a consumer protection agency.

“We appreciate Chairman Dodd’s extensive efforts to secure bipartisan support for this critical part of the financial reform bill, but effective reform is once again being blocked by opposition from the big banks that caused the current financial crisis. The revised proposal does not provide what is needed to protect American families or the financial system as a whole: a strong, independent Consumer Financial Protection Agency with the power to set and enforce fair rules for all types of credit.” said Heather Booth, Executive Director of Americans for Financial Reform

“Abusive lending made possible by inadequate consumer protections was a major cause of the financial crisis, and we cannot allow the status quo to continue,” said Nancy Zirkin, Executive Vice President of The Leadership Conference on Civil and Human Rights. “Big banks and abusive lenders fought responsible regulation before the crisis, and we are all paying the price. It is unacceptable for Congress to allow them to succeed again.”

Consumer protection responsibility for financial products has been scattered across seven different agencies, and is a low priority for them. To remedy this problem the Administration proposed creating a new independent consumer regulator that would consolidate and streamline this authority, and focus on establishing and enforcing fair rules for banks and other lenders when they deal with American families. The agency they proposed would be independent, with authority and enforcement over all lenders. The proposal was weakened in the House, due to industry opposition, but the final House bill still created a new, consolidated and independent protector for consumers and is a major improvement over what we have today.

This recent revised proposal would establish a much weaker consumer regulator that would not have the autonomy or the authority it needs to effectively protect consumers from abusive financial practices. We are particularly troubled by the following proposed changes:

• Loss of Independence. Under the proposal, the agency would be reduced from an independent free- standing agency to a bureau within the Treasury Department. Moreover, the same regulators who failed to stop abuses for years would have veto power over the bureau’s protections. The regulators whose decisions need to be overseen are the banking regulators who have been protecting banks while consumers suffer and American taxpayers pick up the bill.
• Loss of Enforcement. As we saw in this crisis, protections only work if they are enforced. The few protections that were on the books before this crisis were routinely ignored by the existing regulators who refused to enforce them. The revised proposal substantially cuts back the already reduced enforcement authority in the House bill over most banks as well as cutting back enforcement authority over other creditors such as payday lenders… This creates loopholes for predatory lenders and also disadvantages responsible lenders who play by the rules.

We urge the Senate to stand up to the special interests and pass a financial reform bill that has a strong, independent Consumer Financial Protection Agency with the authority to make and enforce protections for American Families.