Deceptive Legislation to Undermine Consumer Protections

By Nancy Wilberg Ricks, Senior Policy Strategist, NCLR

This week, the Senate Appropriations Committee conducted a markup of the 2016 fiscal year budget knowing there would not be much consensus. This was a symbolic gesture that makes a mockery of the appropriations process. Rather than focusing on restoring programs to full funding levels, which would respond to Americans’ needs, decision-makers attempted to use today’s proceedings to weaken financial regulation and consumer protections.

The appropriations bill adopted an amendment that included more than 200 pages of Senator Richard Shelby’s (R–Ala.) “Financial Regulatory Improvement Act of 2015” to ease bank regulations. This was an attempt to pass a massive regulatory relief bill that was previously and adamantly rejected by consumer supporters. Under the guise of helping small and community banks, this bill actually exempts major lenders from essential mortgage provisions that were designed to prevent another economic meltdown. The financial entities that would benefit from these relaxed regulations include multihundred billion–dollar institutions comparable in size to banks like Washington Mutual and Countrywide, which played a major role in the financial crisis.

The amendment also attacked consumer protections. Despite being aware of its proven success, decision-makers sought to alter the Consumer Financial Protection Bureau’s (CFPB) leadership structure from one director to a multimember commission. Historically, five-member boards have hobbled decision-making and increased gridlock—something Washington already experiences far too often. The bill also subjects the CFPB to the appropriations process. In 2010, when Congress passed the bipartisan Dodd-Frank Wall Street Reform and Consumer Protection Act it deliberately kept the CFPB away from an annual appropriations process. As with every regulatory banking agency, the CFPB’s independent funding insulates it from partisan attacks. Congress established this funding stream of non-taxpayer dollars for the Bureau to come from the Federal Reserve.

Today is a perfect example of how the appropriations process can be subverted for pure political gain. It also highlighted the amnesia Washington has when reflecting on our economic past. This fight exhausts Americans. Rather than rolling back consumer wins and strong regulation, leaders should build on these successes and join the fight in creating a more resilient financial system for all.

The Country Can’t Afford a Rollback of Dodd-Frank

By Nancy Wilberg Ricks, Senior Policy and Communications Strategist, NCLR

Last week, Senate Banking Committee Chairman Richard Shelby introduced a 218-page bill, the “Financial Regulatory Improvement Act of 2015,” which would substantially roll back gains made in the Dodd-Frank Act. This is deeply concerning and should give all Americans pause.

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law to right the economy and prevent another financial crisis. It involved some of the most expansive bipartisan legislation since the New Deal in the 1930s.

The nation has already benefited from Dodd-Frank’s improvements to the market. Families are no longer completely exposed to the risk of unnecessarily losing their homes. Credit card terms are better and clearer. Many fringe financial products have been brought to light and restrained. Consumers are more empowered and aware of their rights. This was the intended result and consumers are grateful.

Today the Senate Banking Committee held a markup on rollbacks that would swing the pendulum backward—to the state of deregulation that led to the financial crisis. This is unacceptable.

The financial industry is experiencing growing pains from Dodd-Frank. Some in Congress see this as a bad thing. Consumers and honest lenders think otherwise. The methods banks and nonbanks alike used to make a profit were hazardous to the market and acutely harmful for families, so many of whom saw a generation of wealth vaporize.

In today’s markup, we saw committee members vote along party lines, some in support of vastly loosened standards for banks and nonbanks. Other senators voted for families to maintain a foothold in the financial industry and keep consumer protections.

Let’s Not Repeat This Part of History

While most Americans have grown tired of hearing about the crisis and recovery, we are at risk of repeating history. Latino families are just now beginning to recover. Hispanics lost 66 percent of their household wealth between 2005 and 2009. These trends were exacerbated by geographic location, as a disproportionate share of Latinos live in California, Florida, Nevada, and Arizona, the states that experienced the steepest declines in housing values during the crisis.

In the aftermath, there was a palpable sense that the financial system was fundamentally unsound and action was needed to prevent a future crisis of the same magnitude. That is where Dodd-Frank came in to make repairs.

Responsible regulations and oversight are essential to protecting Latino consumers and ensuring that honest lenders strengthen today’s economy. Hispanics are the nation’s largest minority group, representing 16.4 percent of the U.S. population. Of the 17 million new homes that will be created between 2010 and 2025, seven million will be purchased by Hispanics.

The strong protections that were enacted by the Dodd-Frank Act are critical to ensuring that families can afford their loans and are not targeted by predatory players. Beyond maintaining commonsense regulations, Congress should have viewed this legislative season as a time to finally build the legacy of financial empowerment for families throughout the nation. Instead, they strive to return the markets to risky, unstable times.