[Congressional Record (Bound Edition), Volume 147 (2001), Part 3]
[Extensions of Remarks]
[Pages 3830-3831]
[From the U.S. Government Publishing Office, www.gpo.gov]



    INTRODUCTION OF FINANCIAL SERVICES ``CONSUMER BILL OF RIGHTS'' 
                              LEGISLATION

                                 ______
                                 

                          HON. JOHN J. LaFALCE

                              of new york

                    in the house of representatives

                        Thursday, March 15, 2001

  Mr. LaFALCE. Mr. Speaker, today I and number of my Democratic 
colleagues are introducing eleven bills that would significantly expand 
the protections in current law for consumers of financial services. 
Taken together, our bills provide a ``Consumer Bill of Rights'' in the 
financial services sector and an aggressive consumer policy agenda for 
the 107th Congress.
  Consumers confront unfair and deceptive practices that can only be 
described a ``predatory'' in connection with almost every financial 
decision that affects daily lives. We see predatory practices in 
connection with the homes we buy, with the automobiles we buy or lease, 
with the credit cards we use for everyday purchases and with the short-
term credit we need to stretch our paychecks. Most disturbing, we are 
seeing predatory practices in connection with the most intimate and 
confidential aspects of our personal lives and our financial privacy.
  The financial marketplace has changed significantly in recent years, 
but not all the changes have been positive for consumers. Two broad 
trends, in particular, greatly concern me. The first involves the 
growing segmentation of financial services into two separate and 
unequal financial services structures--one for middle and upper income 
individuals that involves traditional regulated and insured financial 
institutions; a second for lower-income households that involves higher 
cost services from less-regulated finance companies, check cashing 
firms, payday lenders and other quasi-financial entities. Millions of 
American families are being relegated to a substructure of subprime 
credit and high-cost services from which few will escape.
  The second trend involves the growing acceptance and adoption by 
traditional financial institutions of the predatory ethics and abusive 
practices of what was considered, until recently, the fringe elements 
of the financial services sector. Where once the local bank epitomized 
integrity, confidentiality and customer service, today the practices of 
some of our traditional institutions are nearly inseparable from the 
non-regulated lender that pushes unaffordable debt and preys on 
consumers' misfortune. The practices once the province of the loan 
shark are now common placed in the market for credit cards, second 
mortgages, auto financing and other short-term debt.
  These changes have been gradual, but their effect is unmistakable. 
Some of our Nation's largest and most respected financial institutions 
now see few problem in acquiring a widely denounced predatory mortgage 
company or having their name associated with chains of pawn shops and 
check cashing outlets.
  The growing complexity of today's financial marketplace, by itself, 
should prompt Congress to consider additional measures to protect 
consumers. But these trends toward market segregation and predatory 
ethics now demand that consumers have additional rights and greater 
protections against unfair and abusive financial practices.
  The eleven bills we are introducing today seek to address the most 
widespread and abusive practices confronting consumers in today's 
market for consumer credit and basic financial services. I will soon 
separately introduce with a number of my Democratic colleagues a 
twelfth bill that addresses a variety

[[Page 3831]]

of unaddressed concerns involving financial privacy and commercial use 
of personal financial information.
  Two of the bills we are introducing today deal with abuses in an area 
that has come to epitomize predatory financial practices--the problems 
of high cost mortgage refinancing, home equity loans and home 
improvement loans. We have witnessed the growth of an entire industry 
of high-cost ``subprime'' commercial lenders that systematically target 
homeowners with low incomes or damaged credit for deceptive offers of 
high-cost credit. These practices seek to place borrowers more deeply 
in debt, strip away their accumulated equity and force many homes into 
foreclosure. Our bill, the ``Predatory Lending Consumer Protection Act 
of 2001,'' would expand the protections in current federal law to 
prevent loan packing, mortgage flipping, excessive fee financing and 
other practices that make abusive loans profitable. A second bill, the 
``Equal Credit Enhancement and Neighborhood Protection Act of 2001,'' 
addresses the fair lending issues involved in predatory mortgage 
lending. It would add new federal protections to combat the 
discriminatory steering of racial groups to high cost loans and reverse 
redlining in subprime credit, and it would increase mortgage reporting 
requirements to help identify high-cost loans and patterns of 
discriminatory lending.
  Two of the bills also address another area of widespread abuse--
consumer credit cards. U.S. News reported earlier this week that 
Americans now charge more on credit cards than they spend in cash and 
that the average cardholder now carriers a balance of more than $4,400. 
The bill entitled ``Consumer Credit Card Protection Amendments of 
2001'' addresses a variety of abuses that are common to most credit 
cards--inadequate disclosure of interest rates and terms, hidden fees 
and charges, inappropriate solicitations to minors, and penalties for 
practically every consumer action, including paying late, not making 
the minimum payment and even paying off monthly balances in full. The 
second bill, the ``Credit Card Predatory Practices Prevention Act of 
2001'' addresses more systematic fraud in subprime credit card 
solicitations which target people with low incomes or damaged credit. 
It provides more specific strict prohibitions than current law against 
abusive sales practices, bait and switch tactics and billing schemes 
intended to generate interest and penalty payments.
  Another important bill addresses the growing problem of ``payday'' 
loans, which involved short term extensions of credit at annual 
interest rates of 450 percent to 600 percent. Since payday lenders use 
consumers' personal checks to secure credit advances, they hold 
enormous leverage over the consumer in collecting debts by threatening 
the loss of check writing privileges and even prosecution for writing 
bad checks. The ``Payday Loan Consumer Protection Amendments of 2001'' 
would end this practice by prohibiting any extension of credit based 
solely on a check or other instruments drawn on federally insured 
accounts.
  Automobile leasing is another area of growing consumer abuse that is 
addressed by the legislation. The potential abuse in complex lease 
transactions begins with the misrepresentation of lease payments and 
terms in lease advertisements. Today's lease advertisements have the 
single purpose of enticing consumers into dealerships where they can be 
confined into signing almost any
  Additional bills seek to update and modernize two of our nation's 
most important consumer protection statutes. Key protections of the 
Truth in Lending Act, stated in dollar amounts in the late 1960s, have 
not been updated and, consequently, have been eroded by inflation and 
changing market practices. The ``Truth in Lending Modernization Act of 
2001'' updates these provisions and adds new protections to assure that 
TILA's important rescission and civil liability protections remain 
available for consumers. The ``Truth in Savings Enhancement Amendments 
of 2001'' extend the civil liability protections of the Truth in 
Savings Act, which will sunset on September 30, 2001, and make other 
changes to strengthen enforcement against deceptive practices in 
connection with consumer savings accounts.
  Let me briefly describe the final three bills we are introducing. The 
``Unsolicited Loan Check Consumer Protection Act of 2001'' would 
prohibit use of negotiable or ``live'' checks in credit solicitations. 
These solicitations unfairly encourage desperate consumers to take on 
unaffordable debt and raise unnecessary liability concerns for lost or 
stolen checks. The ``Consumer Affordable Transaction Account Act of 
2001'' would require all insured banks, thrifts and credit unions to 
advertise and provide low-cost basic checking account services for 
lower-income consumers without banking accounts. The bill builds upon 
the basic banking account programs already required by New York and 
other states. My final bill, the ``Consumer Banking Services Cost 
Assessment Act of 2001,'' extends authority for the Federal Reserve 
Board's annual survey of banking service fees and expands the survey to 
include credit unions and all fees associated with credit cards.
  Mr. Speaker, recent reports indicate that American consumers are 
drowning in a sea of debt. While family income has stagnated, household 
debt has risen by more than one-third and the equity families hold in 
their homes is lower than it was a decade ago. These conditions create 
desperate consumers and encourage abusive credit practices. And the 
conditions will only worsen if our economy falters.
  With the Truth in Lending Act of 1968, Congress recognized that 
consumers have a basic ``right to know'' the full and accurate costs of 
all financial services. The complexity of today's financial marketplace 
now demands that consumers have new rights and greater protections 
against unfair and abusive practices. The eleven bills that we are 
introducing today offer a broad program of reform that can restore 
consumer protection and customer service as the guiding principles of 
financial services policy.
  The meager attention the Congress has given to consumer protection 
over the last several years has been the result of Democratic prodding. 
We will continue to prod until these important issues get the attention 
they deserve. I urge the support of my colleagues for this important 
legislation.

                          ____________________