[Congressional Record (Bound Edition), Volume 155 (2009), Part 13]
[House]
[Page 18347]
[From the U.S. Government Publishing Office, www.gpo.gov]




          THE NEED FOR A CONSUMER FINANCIAL PROTECTION AGENCY

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from California (Ms. Waters) is recognized for 5 minutes.
  Ms. WATERS. Madam Speaker, I have long been an advocate of consumer 
protections and consumer rights, and I'm proud of the work we have 
accomplished on these issues this session. Laws such as the recently 
enacted Credit Cardholders' Bill of Rights, of which I'm an original 
cosponsor, will help to ensure consumers have access to fair and easy-
to-understand credit products. That said, there is still much more work 
to be done in order to safeguard consumers from predatory and 
discriminatory lending products.
  This Congress is about to embark upon the adoption of regulatory 
reform. We have had an economic meltdown and a subprime mess, and we 
discovered that our regulatory agencies were asleep at the wheel. We 
discovered that there had been deregulation that led us to the point of 
this economic meltdown.
  Judging from the proliferation of products such as subprime mortgages 
and payday loans, our current regulatory framework inadequately 
protects consumers. There are many reasons why we need a new consumer 
financial protection agency. There will be a comprehensive piece of 
legislation that will talk about how we do credible regulatory reform. 
But of all that is in the proposed legislation that is being developed, 
we are getting a pushback from the financial services community on the 
consumer financial protection agency.
  Why is that? Why is it that given what we have gone through the 
financial services community can boldly and barefacedly come before us 
and talk about why a consumer financial protection agency is a bad 
idea?
  I suppose one of the reasons is jurisdictional. There are several 
types of consumer financial products which, because they are offered by 
non-banks, fall into what may be classified as a ``shadow banking 
industry.'' These products and institutions escape Federal regulation 
yet often lead to Federal problems, such as our current economic and 
foreclosure crisis.
  A prime example of this is mortgage servicing. Mortgage services is 
an important part of our housing market, and consumers often have more 
contact with their mortgage servicers than they do with their mortgage 
broker, real estate agent or bank combined. However, lately, many 
servicers have been unable to properly assist consumers due to lack of 
capacity or perhaps just the will to do so.
  The servicers are the ones that are supposed to be doing loan 
modifications. They are supposed to be helping the consumers to unwind 
the mess that many of them have found themselves in because of the 
predatory lending. There is currently no Federal agency with specific 
jurisdiction over the mortgage servicing industry, and therefore, no 
mechanism for anyone to address this pressing issue. The proposed 
consumer financial protection agency would bring nonbanks who offer 
financial services to and interact with consumers into our regulatory 
system.
  Another reason we need a consumer financial protection agency is to 
protect consumers from complicated products and hidden and predatory 
fees. According to Harvard Professor Elizabeth Warren, the average 
credit card offer now comes bundled with more than 100 pages of fine 
print. Buried within this fine print are provisions about restrictions, 
teaser rates and penalties. This fine print is nearly impossible for 
consumers to make informed decisions and pick the credit card or other 
lending product which is right for them. This leads some borrowers to 
be trapped in credit cards or loan products with hidden and abusive 
fees. This agency could solve this problem by working with the industry 
to reduce fine print and hidden fees.
  The final reason we need this new agency is stability. Our financial 
markets are built on consumer lending. Our current crisis began when 
collateralized debt obligations and mortgage-backed securities were 
packed with exotic products, such as no-doc loans and liars loans. It 
was exacerbated as consumers were continually squeezed with excessive 
penalties and fees from bank products, reducing purchasing power and 
leading families everywhere to make tough decisions. A strong 
regulator, one which focused solely on consumer safety and championed 
simpler disclosure and products, could have prevented all of this.
  We need a consumer financial protection agency to deal with this kind 
of crisis so that it never occurs again.

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