Mr. President –I rise today to talk about consumer financial protection. I want to be clear that when I speak about this protection, I am talking about protecting consumers from bad actors; I am talking about educating consumers. When I talk about consumer protection, I am not separating consumers’ protection from the health of the economy. I rise today to talk about what is flawed in Title Ten – the Consumer Protection Title of the financial reform bill – and to raise awareness about an alternative to the current language in Title Ten.
I believe an alternative to this section is desperately needed because the federal government should not be involved in our daily lives and everyday decisions. Under the proposed Consumer Protection title, we would be opening the flood gates of government involvement. The federal government would be telling us how we could spend our money, how we save for the future and by making decisions for us, would truly limit financial markets to the point of economic decline. The federal government should not operate with the belief that it is protecting us from ourselves. However, that is where the current Title Ten language begins its work.
From supporters of this bill, we have heard that in order for consumer protection to truly be effective it needs its own independent agency, or bureau now, and that this Consumer Financial Protection Bureau should be free from outside influence. Independence from outside influence is a fine goal, but our government was built using a system of checks and balances and this Bureau would operate unchecked. It would have unprecedented power and authority to write its own rules. It would have an uncontested budget, and decisions made by the Bureau would be made without regard to the impact these rules would have on the health of our economy. Where is the transparency in this power? Where is accountability of this proposal? And I have not even touched on what this title could do to consumers’ personal information or financial decisions.
To achieve independence, this Bureau would consolidate ALL financial protections and efforts from the various federal government agencies– all in the name of better protecting consumers. Don’t get me wrong – there are issues needing to be addressed for consumer protection, but right now each federal agency acts as a check on its neighbor when it comes to consumer protection. My fear is that once this Bureau has consolidated power, it will not stop at protecting consumers from fraud or deceptive practices though – this agency would only be getting started.
I am deeply troubled about the creation of this Bureau because it would place the Bureau within the jurisdiction of the Federal Reserve. Too many of my constituents already believe that the Federal Reserve gaining additional power is an alarming thought. However, what is most alarming to me is that in fact, the Federal Reserve would have little authority over this proposed Bureau.
Right now as the bill is written, the Federal Reserve would be required to give the Bureau a designated twelve percent of their operating budget. The catch here is that Congress would have no budgetary authority and would not approve this money. Additionally, this money would not be adjusted for inflation. They can even invest any money they don’t spend. (pg. 1073) What other entity has that right? Page 1074 even says these funds are not government funds – that way the cost doesn’t get score but it drives up the deficit and affects the debt.
The Bureau not only has an uncontested budget, the Bureau would be the single-most powerful government agency in the federal government. Not only could the Bureau write their own rules for our state’s businesses and local banks to follow, it would oversee consumer decisions and the Bureau would be the enforcer of these rules. No other agency has this kind of unchecked power. Where is the accountability in this? Unchecked power doesn’t lend itself to accountability either.
What is really important is for the public, for the average American to know is that this bill could protect people, but it could also potentially go ten steps further and take some of their decision-making power and transfer it to the federal government. For example, as the bill stands, it is so overreaching and ambiguous in areas -- it could impact everyday purchases for most Americans.
Here’s how – the Bureau would regulate “consumer financial products or services” as well as “service providers” -- sweeping thousands of already-regulated small-businesses into the Bureau’s purview. Then you add in Section 1027 of the bill and it could penalize anyone who buys or sells something on an installment plan or it could affect any local, small business that offers some kind of monthly payment on credit.
Ever bought a car and paid for it over a few years with a financing plan from the dealer recently? Many of us probably have. This bill’s language is so ambiguous and unclear that it looks like people who want to pay for a service in an installment plan, or those who offer those plans, will be penalized and regulated by this new consumer protection super agency. Small business owners, regular people off the streets and from our states have been streaming into Congressional offices looking for exemptions because of this Title and bill. As drafted, this Title is so ambiguous and so far-reaching that consumers and the good actors are being swept up with the bad.
Anyone who ever paid for dental care in installments could, in the near future, be facing the prospect of paying for dental work up front, as dentists realize they cannot afford to keep up with new regulations, additional regulators or the cost of compliance with the Bureau’s demands.
For auto dealers where financing is hardest to come by in small towns and rural America, this would in fact be a direct hit to your businesses. Right now, the financial burdens of the Bureau would also be borne by auto dealers who direct clients to available financing – but still don’t originate or authorize car loans themselves.
Additionally though, if a consumer purchases something on an installment plan, whether the loan is for a bike, a minivan, braces, an engagement ring, livestock or a home – if there are more than four installments, the government, through the Bureau would have a say in approving that loan.
The Bureau, also in the name of protecting us from ourselves, would require banks to keep and maintain records of all bank account activity and financial activity of their clients-- for at least three years, while also requiring this information be sent regularly to the Bureau for safe keeping. I have serious concerns about our government collecting information on the daily activities of its citizens and equal concerns about the government approving or disapproving the financial choices of its citizens.
I have just outlined why the Consumer Financial Protection Bureau is bad for consumers, why it is bad for small businesses and our communities, and why it is bad for individual consumer choices and freedoms. I point out all of these things to you today because there is an alternative to this Bureau being proposed by my colleagues from Kentucky, Alabama and Tennessee.
This alternative proposal addresses each of the concerns I have just raised about accountability, oversight, consumer protections, consumer education, and consumer rights. This new proposal keeps our current regulatory infrastructure intact and improves upon it. This alternative would not scramble all of our current regulators in the name of change – but instead—has carefully and thoughtfully made our current system better, creating more effective checks and balances.
The consumer protection alternative title would create a consumer protection division, to be housed within the FDIC. The FDIC already oversees consumer deposit protection so it is a logical step to place consumer protection interests here. While the new consumer protection division is shielded from outside influence and has autonomy, the division is at the same time prevented from wielding absolute power. When rule changes or actions are proposed, the FDIC board would be able to use their regulatory experience to protect consumers, while at the same time ensuring safety and soundness are not disregarded.
This Division would still have a presidentially appointed and Senate confirmed Director who serves a four year term in office. Instead of needlessly looping in all kinds of small businesses into the fold for additional regulation, the Division’s mission would be that of proactive consumer education, ensuring consumers are able to receive timely and understandable information on consumer financial products. The Division would partner with other agencies like the Federal Trade Commission to develop guidelines for market oversight. Through these types of partnerships, the Division would pursue fraudsters and the bad actors in our markets. They would be developing best practices for overseeing non-depository mortgage originators and addressing risk-based supervision of non-depository institutions.
Very importantly – this new alternative leaves current prudent regulators in place for banks, savings associations and credit unions, while the Division would watch over the large institutions who have already violated consumer protection statutes. This alternative would provide an infrastructure with regulatory experience that will also meet the demands of growing consumer financial protection concerns. This proposal creates a balance between past regulating experience and the call by consumers to have more protections without losing their rights to make personal financial decisions.
Mr. President, I am a co-sponsor of this Title Ten alternative because I believe in its ability to address consumer protection without regulating consumers out of their rights as citizens. I am a co-sponsor because I believe this alternative regulates the bad actors, without tossing small businesses into the mix and regulating them out of business.
Putting this Bureau under the Federal Reserve with all the concerns and pressures focused on the FED right now is bad idea. Moving consumer protection to an unregulated, non-transparent, not accountable new agency that can write its own rules without review, and operate using unchecked money is beyond comprehension. People are more concerned over their freedoms right now than they ever have been and this will take away freedoms. You have to have the freedom to make choices and even to make bad choices. In America that’s the way it works and big brother isn’t allowed to hang over your shoulder to decide for you whether you’re making a good decision.