May 21, 2015

ICYMI: Consumer Advocacy Groups Oppose "The Financial Regulatory Improvement Act of 2015"

AFL-CIO: “The 2008 financial crisis nearly brought down the world’s financial system. Domestically, the crisis resulted in the loss of homes, jobs, and retirement savings for millions of Americans, including thousands of our members. Working people suffered the consequences of Wall Street greed and, in 2010, many in Congress worked to pass Dodd-Frank to prevent another crisis from doing the same. The AFL-CIO then and now strongly supports Dodd-Frank, and we have consistently spoken out in opposition to all attempts to undermine the reform that was achieved in 2010.”

“Senator Shelby’s draft legislation is yet another attempt to roll back these vital protections. Among other concerns, Titles II and III of the Shelby draft legislation would raise major new barriers to the proper oversight of some of the country’s largest financial institutions, including banks that hold hundreds of billions of dollars in assets and major non-bank financial institutions, such as AIG. Further, the draft legislation removes critically needed protections against high-risk, high-fee loans and the practices that allowed abuses in the mortgage lending process that led to the 2008 crisis.”

Americans for Financial Reform: “Chairman Shelby’s 218-page bill is a major rollback of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. It goes far beyond what might be reasonable regulatory relief for small community banks. Instead, it provides regulatory exemptions for some of the largest financial institutions in the country. This includes exemptions from key systemic risk protections that are directly responsive to problems revealed during the financial crisis of 2008, such as abusive and exploitative mortgage lending, poor risk management at large multi-hundred billion dollar banks, and lack of regulatory oversight for large non-bank financial institutions.”

Better Markets: “The bill, as drafted, would open dangerous loopholes in the financial reform law and expose American families, workers and taxpayers to unacceptable risks not only of another financial crash, but to more taxpayer-funded bailouts due to high risk big-bank behavior. While some relief for some of the 6,500 community banks may be merited, those changes should be carefully targeted to genuine community banks, based on the facts of actual needed relief from specifically applicable provisions, and continue to protect the country, including community banks, from another financial calamity.”

Center for American Progress: “Unless significantly amended and improved, the Financial Regulatory Improvement Act could harm the public and provide little real help to America’s small, community banks. In fact, it could even further cement the advantages enjoyed by large banks.”

“Section 106 of The Financial Regulatory Improvement Act would once again enable creditors to make loans without considering whether the loan is affordable to the borrower by allowing a mortgage made by a creditor of any size to qualify for Qualified Mortgage status, meaning consumers have no legal rights against the lender, as long as a creditor holds the mortgage in portfolio... Proponents of this bill argue that because loans are held on portfolio, lenders have an incentive to ensure a borrower will succeed. But history has shown otherwise. Some of the most egregious predatory lenders, such as Countrywide and Washington Mutual, kept a considerable number of their risky loans on their portfolios.”

Consumer Federation of America: “The bill as drafted would eliminate crucially important consumer protections and reopen financial markets and consumers to the same risks that brought down the financial system in 2008. It would impose unreasonable and unproductive new requirements as part of the oversight of systemically important financial institutions, weaken critical Dodd-Frank Act provisions to contain systemic risk, and limit the accountability and prudence of such institutions.”

Consumer Action: "This legislation goes way beyond “regulatory relief” for community banks by exempting some of the largest banks from important consumer protections. The timing of this bill is unwise, coming on the heels of reasonable safeguards by Congress to help our economy recover from a financial crisis due in large part to recklessness by the financial industry."

Center for Responsible Lending: "For five years, post-crisis lending rules have made the financial system safer by eliminating abusive financial products, reining in reckless behavior, and encouraging more effective oversight. The draft legislation released by Chairman Shelby seeks to gut these protections and rollback the safeguards that helped this country recover from the worst financial crisis in recent history." Click here for CRL fact sheet.

"The draft bill favors large financial institutions over community lenders, undermines consumer protections designed to prevent another economic meltdown, and creates bureaucratic hurdles for mortgage lenders. This is an extreme measure that, if passed, would raise the cost of mortgages, trap borrowers in unsustainable debt, and allow for many of the same unfair and deceptive practices that brought about the recent crisis."

Leadership Conference on Civil and Human Rights: “For weeks, we were told that the goal of the Shelby bill was to make it easier for small community banks to comply with the new wave of financial rules. This would have been understandable. Instead, most of the bill unveiled yesterday has little to do with small lenders. Rather, it appears to be aimed largely at eroding financial services oversight and making it easier to put borrowers in loans they can’t realistically afford.

National Consumer Law Center (NCLC) and 57 other housing organizations: The bill released by Chairman Shelby... would remove sorely needed protections against high-risk, high-feel loans and the practices that allowed abuses in the mortgage lending process to flourish."

"The draft legislation would overturn essential consumer protections adopted to stop the problems that helped bring our country into the greatest recession since the Great Depression."

National Community Reinvestment Coalition: “Chairman Shelby's discussion draft undermines some key provisions enacted as part of the Dodd-Frank law that ensure the safety and soundness of the nation's banking system and to extend consumer protections. It also includes a number of stealth provision on the Government Sponsored Enterprises that limit the paths forward for the housing finance system. As an alternative, Ranking Member Brown has put forth a more measured regulatory relief proposal that includes some additional consumer protections."

National Council of La Raza: "It is clear that the legislation is intended to undermine the Dodd-Frank Act, a landmark law designed to prevent a repeat of the systemic collapse of the financial system that we experienced just years ago. Rather than provide “regulatory relief” to community banks, credit unions, and other small businesses, the bill loosens essential safeguards for the very midsize and large financial entities that precipitated the economic crisis."

National Fair Housing Alliance: "The National Fair Housing Alliance stands opposed to any legislation that could pave the way for the return of abusive banking products and practices in the financial services industry, like those that caused such harm to so many borrowers, especially borrowers of color who experienced the greatest displacement and loss of wealth resulting from the foreclosure crisis."

"Several provisions of the draft legislation seem to ignore the lessons learned from the abusive and discriminatory lending practices that played a central role in the lead-up to the foreclosure crisis. For example, the Dodd-Frank Act established a strong ‘ability to repay’ standard to ensure sound underwriting of mortgages. It requires lenders to make sure – before making a loan – that the borrower can afford to pay the loan back. Yet the proposed legislation would eliminate this common sense requirement for loans held in a lender’s portfolio, while still protecting the lender from legal liability should the loan default, even though experience demonstrates that holding a loan in portfolio is no guarantee that the loan is sustainable."

Public Citizen: "Public Citizen opposes the Financial Regulatory Improvement Act because it contains a sprawling number of provisions that threaten to undermine basic safeguards needed to protect consumers and prevent another financial meltdown, many of which were put into place 5 years ago with the passage of the Dodd-Frank Wall Street Reform Act.”

"This bill emerges amid a persistent campaign from the banking sector, which willfully ignores the fact that the industry operates under an extraordinary public subsidy. Unlike any other business, banks exploit credit made cheap by taxpayer-backed FDIC insurance. In exchange for this subsidy, the public correctly expects that banks not fail."