Statement from Michael D. Calhoun President, Center for Responsible Lending
Washington, D.C.—"Today, House and Senate conferees reached a historic agreement to create a consumer protection agency that is truly independent from the lenders it will oversee: It will have a single director nominated by the president and confirmed by the Senate; funding that is largely insulated from meddling by industry lobbyists; and the tools and scope needed to ensure most lenders operate under one set of common-sense rules. That's a win for families, small businesses, taxpayers and the economy.
Lawmakers began this process more than a year ago, and while there is more work to do, this new agency will be the keystone for reforms to make us all safer from lending abuses, including those that sparked the current financial crisis.
Highlights of the financial reform legislation that lawmakers have agreed to so far include:
- A new independent consumer financial protection agency that will consolidate and give teeth to existing consumer- protection authority now scattered among, but largely ignored by, existing financial regulators. We think this new entity will usher in a new era of oversight, where unfair practices are stopped before they become pervasive and possibly trigger the need for another taxpayer-funded bailout.
- Strong, prudent mortgage rules that say lenders must assess a borrower's ability to repay a loan; that ban kickbacks that encourage lenders and brokers to steer borrowers into more expensive, riskier loans; and that limit prepayment penalties and other excessive fees that trap borrowers in bad loans that strip home equity and end in foreclosure. Some states already have these protections in place. Implementing them nationwide is a giant step towards ending practices that have cost millions of families hundreds of billions of dollars in lost wealth during the foreclosure crisis.
- Stronger foreclosure prevention by including an emergency loan fund to help families at risk of losing their home because of unemployment or illness.
We remain concerned, though, about some provisions. Auto dealers—whose lending record is rife with unfair, deceptive practices, especially for people of color and military personnel—should not have been exempted from oversight by the new consumer protection agency. Also, payday or other unscrupulous lenders should not be allowed to sabotage the consumer protection agency's proposed new rules before they even see the light of day.
Even with these limitations, this advance in consumer protection will benefit homeowners, consumers and the whole economy."
For more information: Kathleen Day at (202) 349-1871 or kathleen.day@responsiblelending.org; Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org; or Charlene Crowell at (919) 313-8523 or charlene.crowell@responsiblelending.org.