Financial Reform Approved Today by U.S. House Contains More Good Than Bad for Consumers, but More Work Needed, Says Consumer Watchdog

/PRNewswire/ -- Consumer Watchdog applauded approval by the U.S. House of Representatives of its financial regulatory overhaul bill, H.R. 4173, including the creation of a strong consumer regulator, but cautioned that more must be done to protect American homes and savings and prevent the big banks and Wall Street from dragging the nation into the next economic crisis.

An amendment to the bill that would have eliminated the consumer regulator from the bill entirely was defeated by just 15 votes, demonstrating the continuing efforts of the financial industry, which gave $28 million to members of the House this year, to defeat real reform.

Critical protections for American consumers, homeowners and investors are missing from the House bill. Problems that still must be addressed include:

-- Limits on the authority of states to act on citizens' behalf to
address financial abuses (inserted into the bill late Wednesday after
New Democrats held the bill hostage; read the Consumer Watchdog
analysis of financial industry contributions to New Dems and amendment
sponsors here:
http://www.consumerwatchdog.org/politicians/articles/?storyId=31656)
-- Loopholes in derivatives regulation proposal that could leave 30% or
more of the multi-trillion dollar market unregulated
-- Exemptions for some public firms from outside audits of their books
(rolling back provisions of post-Enron accounting reforms)
-- Little authority to break up banks that endanger the financial system
with their size or behavior
-- No relief for struggling homeowners to allow bankruptcy judges to
adjust the terms of home mortgages


"It's vital that the consumer protection agency withstood the assault from the banks, but restrictions on states' ability to protect consumers and exemptions for some financial institutions must still be addressed. The House bill takes critical steps towards reform, but was weakened by the financial firms who want to avoid strong oversight," said Carmen Balber, Washington director for Consumer Watchdog. "We look to the Senate to strengthen financial reform as it moves forward so consumers are truly protected against abuses and outrageous treatment by lenders and financial institutions."

Download a detailed analysis of the good and bad in the bill, compiled by Americans for Financial Reform, here: http://www.consumerwatchdog.org/resources/HR4173goodbad.pdf

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Council Applauds House Passage of Financial Reform Bill

/PRNewswire/ -- The Council of Institutional Investors applauds the House of Representatives' efforts to strengthen the regulation of the U.S. financial system through the reforms contained in the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173).

The Council is grateful to Representative Barney Frank (D-Mass.), chairman of the House Committee on Financial Services and prime sponsor of the bill, for his leadership on this important and comprehensive legislation.

"The House of Representatives has taken a significant step toward restoring trust in U.S. financial markets," said Ann Yerger, executive director of the Council of Institutional Investors. The Council believes that the global financial crisis revealed critical gaps in the regulation of U.S. markets and the urgent need for improvements in corporate governance. "The Wall Street Reform and Consumer Protection Act gives regulators and investors new tools to oversee financial firms more diligently and promote market stability," Yerger added.

Many provisions of the act are in tune with Council priorities and the recommendations of the Investors' Working Group, which the Council has endorsed. In particular, the Council welcomes the act's affirmation of the authority of the Securities and Exchange Commission (SEC) to give shareowners the right to place their nominees for directors on company proxy cards. Making it easier for investors to nominate their own candidates for director would invigorate board elections and make directors more responsive, thoughtful and vigilant.

The Council also lauds measures in the legislation that enhance the oversight and accountability of credit rating agencies and bolster the resources of the SEC. However, the act's provisions to regulate over-the-counter derivatives trading, while an improvement, need to be strengthened.

Passage of the Wall Street Reform and Consumer Protection Act of 2009 marks progress toward an urgently needed, broad overhaul of financial markets and corporate governance regulation. The Council looks forward to Senate approval of comprehensive regulatory reform legislation next and is eager to work with Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Senator Richard Shelby (R-Ala.), ranking member of the Senate Banking Committee, on the proposed Restoring American Financial Stability Act of 2009.

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The Consumer Credit Bureaus are Unraveling American Self-Reliance and Compromising Our Greatest National Assets: The Individual and Small Business

/Standard Newswire/ -- The Consumer Credit Reporting Bureaus, which purport to help lenders
evaluate risk, control the flow of credit and encourage fiscal responsibility, have instead played a significant role in destabilizing the economy and are impeding America's recovery.

It is a predatory system that seizes on financial hardships and turns short-term setbacks into long-term liabilities. For the small business owner, he risks losing not only his business but also his personal livelihood and often a lifetime of investment.

And the nation loses its critical buffer: the once-resilient small business, when 'big business' falters.

"The Consumer Credit Bureaus have been ruthlessly chipping away at small business and are now derailing America's economic recovery. We created the website
www.abolish-the-credit-bureaus.com (http://rs6.net/tn.jsp?et=1102862490430&s=13633&e=001-W_WIUx6oUMs-HrxjHW-kUMAKm-mqGf8-RqK0quO-dbijcIIobiKZ5H55jw28xFYz0vX66C5COpZBuxbiFlL30CbIO4k32wakPqjbtyOvY80th7xxAqN3_ozoDI3Pjaq1cd--vN5l44=), Video-short and Petition as vital tools for change; including examining recent comments by President Obama and Federal Reserve Chairman Bernanke," says small business owner, Deborah Fineout-Launey, of marketing firm LHH&F.

"Second mortgages, personal credit cards, large personal guarantees and the Consumer Credit Score should not be the tools for corporate lending. A national summit on small business is meaningless without lending reform," says Ms. Fineout-Launey.

When economic setbacks or downturns occur, many in the economy are affected - not because of
credit 'abuse.'

Yet, in this system, the small business owner, working in good faith to stabilize his business and
ride out the economy, finds that:

· A personal debtor's prison quickly arises;
· Leading to usurious fees;
· Loss of essential banking relationships;
· Credit defaults increase;
· Assets, personal and corporate, are stripped;
· Putting all parties' investments in escalating risk

The result is the unmerited loss of viable small businesses, loss of essential tax revenues, rampant unemployment, loss of real estate leases, healthcare, personal livelihoods, home foreclosures, and a dangerously weakened middle class.

"It is time to abolish the Consumer Credit Report and Score from small business lending and, frankly, in general. It reduces the small business owner's significant investment, and the investment of his lenders, to a gamble of epic proportions. It is a matter of moral conscience and economic necessity," she adds.

Robert Launey and Deborah Fineout-Launey are small business owners in New York, committed to drawing attention to the economic fallout created by the Consumer Credit Report and Score in small corporate lending.

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Banks’ Actions on Credit Cards Undermine Consumer Protections

Low- and middle-income households with credit card debt owe, on average, $9,827 on their cards. If you make the minimum monthly payment -- under many agreements 2 percent of the balance or $10 -- at 10 percent interest, it will take you more than 26 years to pay off the balance, including $6,812 in interest payments.

But what if the rate was raised even higher, or if your rate was tacked to the prime rate (currently 3.25 percent). It could take more than a lifetime to pay off that kind of debt.

In May, Congress adopted the Credit CARD Act to protect consumers from capricious rate hikes. Under the act, banks must give consumers at least 45 days notice before raising their rates. And beginning in February 2010, banks cannot raise rates on existing balances unless a consumer is in default.

Just last week, however, House Financial Services Committee chair Barney Frank accused banks of abusing the “grace period” they were given before all the law’s provisions take effect. Unfortunately for consumers, he’s right.

For example, Wells Fargo announced last week it was raising rates on existing accounts by up to 3 percentage points. Other card issuers, including such large banks as Bank of America and JPMorgan Chase, also have been accused of raising rates on balances prior to the law’s effective date.

Additionally, in June, Bank of America and Chase switched many cardholders from fixed- to variable-rate cards. Variable-rate cardholders are not protected from unexpected rate changes under the new law, because rate changes are permitted as the prime rate moves up and down.

Those most likely to be harmed by higher borrowing costs are consumers who are relying on their credit cards to carry them through the economic downturn. According to Démos, a non-partisan research and advocacy organization, most low- and middle-income households with high debt-stress levels -- the ratio of a family’s credit card debt to their annual income -- use their credit cards to pay for unavoidable expenses, such as medical expenses or to cover household essentials after a job loss, not for discretionary items.

Higher rates lead to longer payoff periods and thousands of extra dollars in interest payments. Let’s take the case of the average low- and middle-income households with $9,827 in credit card debt. If they continue to make the minimum monthly payment on that amount but at 13 percent interest plus prime, rather than our previous example of 10 percent interest, it must pay $19,897 in interest payments over the more than 45 years it will take to clear the balance. And because the prime rate is at historically low levels, this example likely presents a best-case scenario.

Many cardholders have responded to the downturn and the higher borrowing costs by reducing their debt. In July, revolving credit, which is largely credit-card borrowing, declined. For many, however, reducing debt during these tough times is not an option.

Moreover, changes in the availability of credit are also making it more difficult for cardholders to protect themselves from the banks’ actions. In the past, cardholders could demand better terms by threatening to take their business elsewhere. Today, this option is limited, because many banks have tightened credit-card approval standards.

Banks may be putting themselves at risk by their actions as well. If consumers are subjected to usurious rates as the prime rate rises, more will inevitably default on their debt. Banks will find it difficult to make up for these losses by further raising rates on consumers who are already stretched to their limits.

Bank of America vowed last week to stop raising interest rates before the February limits take effect, making the announcement as Rep. Franks’ committee met to consider moving up the effectiveness date of the new legislation. But such a promise offers too little, too late for many consumers who have already been harmed.

It is time for banks to rethink their recent moves and for Congress to do more to protect consumers.

By Jamie Lau

Jamie Lau is a research fellow with the Community Enterprise Clinic at Duke Law School.

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