Showing posts with label Consumer Financial Protection Agency. Show all posts
Showing posts with label Consumer Financial Protection Agency. Show all posts
Monday, May 24, 2010

Protect Small Business Owners Now Through Financial Reform

Posted by American Forum at 2:36 PM

LOUISIANA FORUM

By Camille Moran

Wall Street’s collapsing house of cards brought us a time of economic turmoil that most of us have not seen in our lifetimes. Patching the house of cards back together, though, will not bring us lasting recovery.

When will Washington realize that Main Street needs true financial reform and not just piecemeal crumbs dubbed as reform by Big Business and Wall Street? When will Washington realize it is small business that drives our nation’s economy – that without that entrepreneurial spirit, the wheels of our country’s economic system would no longer turn?

Had there been adequate rules in the past, there is a good chance the Great Recession would not have occurred, or at the least, have been less severe. This would have meant less pain for small business owners, with far fewer business failures, home foreclosures and job losses.

Small businesses didn’t have the luxury of being bailed out by the government as the big financial institutions did. While America waits for comprehensive reform, more families face home mortgage foreclosures, and more small businesses are unable to borrow money, crippled by self-serving Wall Street gamblers, who, enabled by bonuses and Washington bailouts, push aside anyone who gets in their way in order to satisfy their insatiable greed.

As a small business owner, I see the need for comprehensive financial reform that would bring about strong transparency, oversight and accountability to Wall Street. Most importantly, financial reform must include the establishment of a strong Consumer Financial Protection Agency (CFPA) with independent rule-making authority and enforcement powers -- not a branch of the Federal Reserve influenced by the Wall Street “fat cats,” whose total disregard for the needs of Main Street catapulted our economy into chaos in the first place.

Our local Chambers of Commerce claim to represent the needs of small business owners, when they in fact, are often under the umbrella of larger associations, such as the Louisiana Association of Business and Industry (LABI), who actually serve as mouthpieces for Big Business. It is these types of organizations across the country that aggressively fight to kill proposals aimed to create a new CFPA, deceptively claiming it to be in the best interests of their small business owner members – all the while knowing that a CFPA would help stabilize the economy, but being too afraid to stop protecting the Big Business interests who pad their pockets.

But we small business owners know the truth – the CFPA would provide protection against unfair “tricks and traps” lending. Small business owners -- who regularly rely on credit card financing and take out home equity lines of credit to get started or stay afloat -- would benefit enormously from these reforms and from the increased stability that would come from meaningful oversight of the credit markets.

Our elected officials should resist the efforts of Wall Street and other special interests to water down consumer protection through amendments that strip crucial power from states and attorneys general to enforce or enact consumer protection laws, and carve out special exemptions for auto dealers and other businesses. Business owners and consumers need full and fair disclosure of the costs and risks of ALL financial products, services and lending.

According to a recent Washington Post-ABC News poll, about two-thirds of Americans support tighter regulations on the way banks and other institutions conduct their business. Bipartisan support is especially high for greater federal oversight of the way banks and other financial companies that make consumer loans such as credit cards, auto loans and mortgages.

Most of the nation’s new jobs are created by small businesses, and effective financial reform will enable businesses to fill this role as they secure fair credit, hire new employees and build our communities and our economy.

It’s important that our elected officials act expediently on behalf of all small business owners. We can’t let our hard-working small business owners down by protecting the big banks and Wall Street. Instead, we need comprehensive financial reform that includes a Consumer Financial Protection Agency powerful enough to prevent the predatory lending that proved so catastrophic for our economy.
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Moran is the owner and CEO of Caramor Industries, LLC, in Natchitoches.
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Copyright (C) 2010 by the Louisiana Forum 5/10

 

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What is the Financial Industry So Afraid Of?

Posted by American Forum at 2:24 PM

AMERICAN FORUM

By Lew Prince

I’ve owned a small business in St. Louis for 31 years. Like most of my customers and my 26 employees, I watched as greedy hedge funds, irresponsible investment banks and unscrupulous mortgage companies decimated our savings, investments and pension funds, and nearly drove our country into another Great Depression. Now those same hedge funds, investment banks and mortgage companies are spending more than $1.4 million dollars a day (that’s right -- a day) to scuttle financial reform legislation in the U.S. Senate.

What’s the financial industry so afraid of?

Well, there’s the Consumer Financial Protection Agency (CFPA), which passed the U.S. House of Representatives but is under siege in the Senate. The CFPA would make sure banks, mortgage companies, payday lenders and car dealers lay out loan terms in plain language so individuals, families and businesses will know what they’re getting into when they borrow money. It would set clear ground rules for loans, protecting Americans from the kinds of sleazy deals that cost so many people their homes and livelihoods in the wake of the recent Wall Street collapse. And it would actually reduce government bureaucracy by streamlining and combining all federal consumer loan regulations under one roof.

The financial meltdown has shown us how greedy and unscrupulous operators can disrupt the flow of credit and bring our economy to its knees. A consumer protection agency would protect my customers, my business and the economy, keeping responsible lenders from having to compete with sleazy credit hustlers. Common-sense regulation will free money to flow to responsible borrowers, protect the value of our savings and pension funds and direct our nation's financial resources toward job creation and the return of our national prosperity. That’s why I joined with hundreds of business owners around the country in signing a Business for Shared Prosperity statement in support of a strong, independent Consumer Financial Protection Agency.

The financial industry lobbyists want the senators they've been wining and dining to keep loan regulation in the hands of the same banking regulators that let money-crazed investment bankers nearly destroy our economy. Does that make sense to you?

Another provision that has the financial lobbyists up in arms would bring derivatives trading out of the shadows and into a regulated, transparent exchange. Reckless derivatives gambling led to catastrophe, and will again without tough new regulation.

Another financial reform provision that should be strengthened -- not weakened -- is the language separating risky investments and commercial banking. Banks should not be able to keep gambling for their own profits and executive bonuses while also benefiting from the Federal Deposit Insurance Corp. (FDIC) and subsidies like access to the Federal Reserve discount window.

We need to get banks out of the Casino Economy and back into the business of lending to America’s true wealth creators: working people and small businesses. That’s how to get real economic growth.

Wall Street lobbyists succeeded this week in defeating the Brown-Kaufman amendment, which would have capped the size and leverage of our largest banks so they could be wound down when they fail without sinking the economy. They also succeeded in stripping a dissolution fund for investment banks from the legislation, which would have worked like the FDIC bank-paid resolution fund that protects depositors when a bank fails.

Taxpayers were stuck with cleanup costs for the financial crisis. Banks, not taxpayers, need to pay for future crises. Maybe I’m crazy, but it only seemed fair for us to ask them to take money out of their bonus pot to pay their insurance premiums.

Congress could redeem itself by supporting a permanent bank tax to offset the direct and indirect costs of the financial meltdown and discourage the kind of risk-taking that tanked the economy. This is no radical idea. The International Monetary Fund supports it.

Strong financial reform will help small-business owners by providing the kind of stable financial environment in which small businesses can thrive.

Politicians love to point out that most new jobs are created by small businesses. Senators should listen to the business owners who know the difference between gambling and investment, who didn’t wreck the economy and who want real reform to prevent a repeat.
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Prince is managing partner of Vintage Vinyl Inc. in St. Louis.
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Copyright (C) 2010 by the American Forum 5/10

 

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Wednesday, May 19, 2010

Wall Street Needs Transparency and Accountability

Posted by American Forum at 10:57 AM

AMERICAN FORUM

By David Hills and Michael Lent

Millions of America’s small business owners suffer from bad practices on Wall Street -- something often given short shrift in debate about creation of a consumer financial protection agency.

As owners of a financial advisement firm with offices in Portsmouth, N.H., San Francisco and New York, we focus on financial products with sustainability, values and transparency. And with more than 70 years of collective experience in the financial services industry, and many clients owning small businesses, we've long known that what's good for Wall Street isn't necessarily good for small businesses and consumers.

Through irresponsible lending, greed and poor risk management, huge Wall Street investment firms and banks brought about a financial crisis that's resulted in massive unemployment and hardships for millions. But while small businesses have borne the brunt of the downturn, it is they who will create the jobs that rebuild our communities.

Ability to access affordable credit with clear and concise contractual language is imperative. Studies have shown that most small businesses are financed through the personal credit of their owners, yet ubiquitous tricks and traps of credit cards and consumer loans have snared small business owners just as they have individuals. What’s worse is that large banks and credit-card companies have unilaterally withdrawn credit from small business owners just when they need it most -- and they've done so regardless of credit and payment history.

A Consumer Financial Protection Agency (CFPA) that safeguards financial products and services is long overdue. We all rely on sound business practices when we expand our businesses, hire new workers, meet payroll and do long-term business planning.

Business owners need the security of knowing that the financial services they receive from one lender carry the
same level of protection as those from any other, and that all lenders – credit cards, trade credit and independent finance companies included – are offering fair financial services.

It's wrong to think the choice lies between consumer protection and a sound environment for banking – as if these issues could ever be mutually exclusive. Any legitimate industry can prosper under fair regulation simply by offering products and services that users understand and can purchase without being tricked. Our economy and the financial sector will prosper over the long haul only if financial transactions no longer include deception, profiteering and excessive risk-taking. The current lack of consumer protection has helped plunge our banking system into crisis, wreaking havoc on millions of individuals and families.

Financial reform that includes a strong independent consumer financial protection agency will end the reckless use of financial products that has stalled small-business expansion and necessitated countless layoffs. Transparency and accountability must be applied to financial markets. A CFPA will help the economy and those financial companies already practicing fair policies. No longer will responsible firms need compete against those that profit from unscrupulous practices, unfair terms and deceptive marketing.

A CFPA is good for business, good for the economy. It's a core element of financial reforms wending through Congress. And anything less than a strong, independent consumer financial protection agency will perpetuate whatever sense of mistrust Americans already have in Wall Street and government.

Protecting consumers and small business from financial ruin shouldn't be a partisan issue. Never, ever. Democrats and Republicans alike must swiftly enact this legislation and get our economy working again.
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Hills is a Partner with Veris Wealth Partners in New Hampshire and Lent is a Partner with Veris Wealth Partners in New York.
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Copyright (C) 2010 by the American Forum. 4/10

 

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Tuesday, March 30, 2010

Business Owners Need a Strong Consumer Financial Protection Agency

Posted by American Forum at 3:19 PM

AMERICAN FORUM

By Margot Dorfman

The reckless and deceptive practices of our financial industry have devastated businesses, families and our economy. It is time for Congressional leaders to stop listening to financial industry lobbyists and start protecting the future of our nation. The U.S. Women's Chamber of Commerce believes the establishment of a strong Consumer Financial Protection Agency (CFPA) is a crucial step in reforming financial rules and restoring the trust we need to rebuild a thriving American economy.

The CFPA will benefit business, especially small businesses, which create most of the nation’s new jobs. It’s too often forgotten in the debate over the CFPA that small-business owners frequently rely on personal credit -- such as personal credit cards and home equity loans -- to start, run and expand their business.

Small-business owners have been hit hard by the continuing crisis in business and consumer lending. They have been rocked by waves of credit contraction, foreclosures and business closures -- affecting them, their customers, suppliers, the communities they do business in and their families.

Banks that profited from predatory lending now are choking businesses by cutting lines of credit or pulling them entirely.

Some of our members have been forced out of business. Others are struggling to keep doors open. Many of our members can't expand their businesses even though they have viable business opportunities because they cannot access the credit needed to capitalize on their opportunities. Even with orders and contracts in hand, they can't get credit needed to hire new workers, buy new equipment and add necessary business infrastructures.

The unscrupulous practices of the credit-card industry have delivered another hard blow, as unwarranted credit rate escalation, increased fees, and decreased credit availability have left many firms unable to manage day-to-day purchases.

Lenders offering sound mortgages and other credit were undercut by those pushing misleading products with hidden risks. Women were 32 percent more likely to have received subprime mortgages of all types than men, regardless of income. Women also are 41 percent more likely than men to have received higher-cost subprime loans, regardless of income.

Women business owners and consumers have been hurt especially hard by predatory lending. Millions of women business owners, who used their home equity to secure small-business loans, are at risk of losing both their homes and businesses.


Elizabeth Warren, chair of the Congressional Oversight Panel charged with reviewing the state of the financial markets and regulatory systems, provided this snapshot of economic devastation in a December article: "One in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put 10 million homeowners out on the street."

A disproportionate number of those suffering are women. Women, who were already at a higher risk for retirement insecurity, are now terrified about what the future will hold.

We cannot let the financial practices that drove us to this disaster continue. If we do, there will be no real recovery for business and for women generally. The next crisis, when it comes, will be even worse.

Business owners and consumers need the security of knowing that the costs and risks of financial products, services and lending are fully and fairly disclosed. We need a strong federal agency to promote financial product safety and accountability. We need a CFPA with independent rule-making authority and enforcement powers.

We cannot let financial industry lobbyists succeed in killing the CFPA or winning a pale substitute that would not actually be able to protect consumers and small-business owners. We cannot accept a CFPA subject to interference by bank regulators who have failed us time and time again.

We cannot let those whose risky, deceptive practices destroyed so many jobs and businesses kill the reforms designed to prevent the next calamity. It is time for our Congressional leaders to act to support the financial protection and well-being of all Americans.

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Dorfman is CEO of The U.S. Women's Chamber of Commerce (TM), the leading advocate for women on economic and leadership issues and vice president of the National Association of Small Business Contractors.
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Copyright (C) 2010 by the American Forum. 3/10

 

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Tuesday, November 17, 2009

Consumer Financial Protection Agency: Firewall Against Financial Malware

Posted by American Forum at 11:45 AM


TEXAS LONE STAR FORUM
By Don Baylor

Commercial innovation remains at the heart of the American tradition. However, innovation should be used to increase American wealth, not destroy it.

Leading up to the financial crisis, gaps in our financial monitoring system unleashed a financial virus still worming through the American economy. Products like overdraft fees, payday loans, and “pick-a-payment” mortgages all damaged our economy. The resulting system crash led to historic levels of foreclosures, lost wealth and chronic unemployment.

As new, complex financial products enter the marketplace, our regulatory firewall must be able to detect toxic financial products and safeguard Americans from financial harm. We need a national solution that honors state authority in order to protect American wealth from future meltdowns. The proposed Consumer Financial Protection Agency (CFPA) would help avoid repeat financial disaster by ensuring that all “off-the shelf” financial products can be monitored by one inspector with a clear code book.

The financial crisis taught us several lessons. First, banking regulators are ill-equipped to be consumer watchdogs. Second, when financial institutions can shop around for the “regulator of least resistance,” Americans get the short end of the stick. Finally, economic crises transcend state lines, so we need a national standard for financial product safety and a strong watchdog entirely focused on consumer protection.

These lessons indicate the need for a better firewall to protect us from financial “malware.” Our federal regulatory structure stretches across seven agencies attempting to enforce 20 statutes. As a result, no one agency is accountable for financial product safety, and many consumers do not know where to file an effective complaint about financial services.

We should consolidate and strengthen consumer protection to prevent another viral outbreak from taking down the system and destroying American wealth. The CFPA would make this regulatory structure more efficient and effective by centralizing these functions and personnel.

We need a robust, independent body to protect consumers from unfair credit, payment and debt management products, no matter what company or bank sells them and no matter what agency may serve as the regulator. Financial institutions offering similar products should be held to the same standard for consumer safety.

The CFPA would examine commonplace checking account product “services” such as overdraft loans or fees. Most banks automatically include this “coverage” without consumer consent. Many financial institutions charge at least $35 when the customer overdraws by as little as $1, setting up a potential cascade of very expensive short-term loans. The FDIC calculates that the typical overdraft loan equates to a 3,520 percent annual interest rate. The customer is not typically given a choice to decline the fees at the time of transaction. Last year, banks made nearly $37 billion on overdraft charges, about $300 for each banking customer in the U.S.

This unfair “loan without consent” reduces consumer confidence and drives existing customers away from banks into higher cost, fringe financial markets that drain wealth. CFPA could require that issuers notify debit card users that a transaction would overdraft their account.

The proposed CFPA could also help increase the national savings rate. Over the past few decades, the national savings rate steadily declined to a point at or below zero, as recently as 2006. With the economic crisis, savings rebounded somewhat, but are still far below healthy household saving levels. The CFPA could make savings easier and more automatic so that more Americans build financial cushions and retirement security, leaving them more resilient when the economy dips. This agency would use a research-based approach to understand how Americans approach saving, investing and borrowing.

In Texas, we know a little bit about toxic financial products. With the lowest average credit scores, lax financial regulation and runaway payday loans, Texans are especially vulnerable to dangerous products that strip wealth from households and communities. Under the CFPA, many high-cost, “rinse and repeat” products like payday and automobile title loans—offered by credit services organizations—might receive increased scrutiny. That would be a welcome innovation.

Properly implemented, the CFPA will spur innovation through new asset-building products that promote a “race-to-the-top” challenge and lead to better consumer choice. The CFPA’s goal would be to ensure safety and transparency of financial products, and to detect and quarantine products designed to destroy wealth.

In other words, CFPA will help prevent another collapse of our economy due to hazardous financial products.
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Baylor is senior policy analyst at the Center for Public Policy Priorities, an Austin think tank.
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Copyright (C) 2009 by the Texas Lone Star Forum. 11/09

 

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