[Congressional Record Volume 143, Number 84 (Tuesday, June 17, 1997)]
[Extensions of Remarks]
[Page E1234]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         DEPOSITORY INSTITUTION CONSUMER PROTECTION ACT OF 1997

                                 ______
                                 

                          HON. JOHN J. LaFALCE

                              of new york

                    in the house of representatives

                         Tuesday, June 17, 1997

  Mr. LaFALCE. Mr. Speaker, today a number of my Democratic colleagues 
are joining with me to introduce comprehensive consumer protection 
legislation. It is our hope that key elements of this legislation can 
become part of the financial modernization legislation we will begin 
marking up in the Banking Committee later today.
  I support financial modernization legislation because I believe It 
potentially holds out many benefits for consumers and taxpayers. 
Product diversification and broader competition should increase the 
safety and soundness of our financial system, improve efficiency and 
make available more services at lower cost to consumers.
  But the continual modernization of financial services holds risks as 
well as benefits. In limited contexts, banks already participate in the 
insurance and securities businesses. The result of the pending 
legislation would be that banks will be entering fully into these 
businesses, and other financial firms will be able to enter into the 
banking business.
  As consumers deal increasingly with banks that may be part of large-
scale diversified financial institutions, they potentially become more 
vulnerable. Congress must ensure their interests are protected.
  Consumers are already experiencing some serious difficulties. There 
are all too many examples of situations in which consumers have been 
coerced, misled or confused, and have suffered and endured financial 
losses as a result.
  Banks remain a unique part of our financial services system. They are 
insured depository institutions, backed by the Federal Government 
through the Federal Deposit Insurance Corporation. They therefore offer 
consumers a level of protection--and intuitively instill a sense of 
confidence--that is not so automatically characteristic of other 
financial services providers. As a result, they must bear unique 
responsibilities.
  Consumers will no longer simply be using banks to make deposits or 
purchase a limited array of investments products. They may also be 
using their bank to pursue a broad range of investment opportunities or 
purchase a full array of insurance products.
  The potential for one-stop shopping and consumer savings is real and 
substantial. But so is the potential for confusion. It will be 
increasingly important that consumers fully understand the exact nature 
of, and risk associated with, the product they are purchasing. And it 
will be equally important that they understand their rights. Consumers 
must be assured that applications for extensions of credit will be 
judged only on their merits.
  Some of the key elements in the legislation I am introducing today 
are:
  Clear disclosure requirements which would ensure that consumers know 
precisely whether a product is or is not an insured product, and what 
risk is associated with it;
  A strong prohibition against misrepresentation about the insured 
status of, or risk associated with, any product;
  Anticoercion requirements that prohibit extensions of credit from 
being made conditional upon the purchase of another nondeposit product;
  A suitability standard to ensure that the nondeposit product is 
suitable and appropriate based on the financial information disclosed 
by the consumer;
  Provisions requiring reasonable physical segregation of the conduct 
of banking and nonbanking activities;
  A provision requiring the development of a consumer dispute 
resolution mechanism so that consumers can readily have their concerns 
heard and any violations of the consumer protection requirements can be 
redressed; and
  Procedures which would allow consumers to exercise more control over 
the sharing of information related to their financial transactions.
  As changes occur in the marketplace in reaction to any modernization 
legislation we pass, it will be important that we monitor the situation 
closely to see how well consumers are being served. But this 
legislation should help ensure they receive the benefits financial 
modernization has to offer, and are protected from the risks.

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