ALERT: Senate Banking Committee Consumer Protections Hearing Recap

Notably, today's Senate Banking hearing comes just two days before the House Financial Services Committee, Subcommittee on Capital Markets is scheduled to hold a hearing entitled "Perspectives on Systemic Risk," the first in a series of hearings to assist Congress in crafting legislation to create a systemic risk regulator for the financial services industry in advance of the upcoming April 2 G20 meeting in London. The issue of whether to create a separate entity for consumer protection is one of many that we expect to be further discussed in upcoming weeks as Congress drafts an outline for regulatory reform.

To recap, today's opening remarks by Chairman Dodd centered on:

(1) Regulatory Reform, Possible Creation of Consumer Protection Entity. Chairman Dodd indicated that regulatory modernization to enhance protections for consumers and investors is a “top priority” for him, and emphasized reform that would put the needs of consumers, investors and shareholders at the center of the reforms. Chairman Dodd inquired whether bank regulators should continue to have authority over consumer protections. In particular, Chairman Dodd noted that the Fed had been given authority to ban abusive home mortgage practices in 1994 and that it had “failed miserably.” Chairman Dodd inquired whether it was time to create a new regulator with the primary focus of consumer protection, such as for example an entity modeled after the Consumer Product Safety Commission. However, Ranking Member Shelby warned against creating more agencies in a regulatory regime that gives consumers “a false sense of security.” Notably, the Financial Services Roundtable (FSR) witness Steve Bartlett opposed proposals that would separate consumer protection regulation and safety and soundness regulation into separate entities, noting that issues are interrelated.

(2) Abusive Credit Card Consumer Protections- Chairman Dodd noted the need for sweeping reform of abusive credit card practices as an essential component of the Senate Banking Committee's financial modernization efforts.

(3) Abusive Mortgage Lending Practices- In addition, Chairman Dodd emphasized that reform of abusive mortgage lending practices would also be a centerpiece of the Committee's financial modernization efforts.

(4) Unfair, Abusive and Deceptive Practices, Including Fraud Scams - Chairman Dodd emphasized for strong prohibitions against unfair, abusive and deceptive practices, including fraud scams, generally.

(5) Transparency of Transactions. Chairman Dodd emphasized the need for increased accountability, disclosure and transparency to ensure that consumers and investors understand the rules of the road regarding their transactions.

Witnesses:

Panel 1
Honorable Steve Bartlett , President and CEO, Financial Services Roundtable
Honorable Ellen Seidman , Senior Fellow of New America Foundation , Executive Vice President of ShoreBank Corporation
Professor Patricia A. McCoy , George J. & Helen M. England Professor of Law, University of Connecticut School of Law

Their testimony can be found on the Senate Banking Committee's web site.