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March 1, 2010

State AGs Push for a Strong Federal Consumer Financial Protection Agency

A vote against the agency is a vote for the big banks and Wall Street
-- and a vote against Iowa consumers, says Iowa A.G. Tom Miller.

Washington, D.C. — A group of State Attorneys General gathering for their spring meeting in Washington D.C. today strongly urged the U.S. Senate to pass legislation to create an independent federal Consumer Financial Protection Agency (CFPA).

“This is exceedingly important to Iowans and consumers everywhere,” said Iowa Attorney General Tom Miller. “The agency would work with states to protect consumers from abuses by the financial industry – and it would help prevent a recurrence of the financial meltdown that has left thousands of Iowans without jobs or at risk of losing their homes.”

Legislation to create the CFPA is pending in the Senate after passing the House of Representatives.

“The Senate needs to pass this legislation,” Miller said. “A vote against the CFPA is a vote for the big banks and Wall Street, and a vote against consumers. Iowans are rightfully concerned and angry about the near-collapse of the economy, largely caused by irresponsible lending by big banks and Wall Street firms.”

Miller, who organized the group of Attorneys General, noted that no agency in Washington has a sole mission of protecting consumers. “The division of consumer protection between multiple federal agencies leaves us with no federal agency with consumer protection as its top concern. Consumers, every-day Iowans, have been largely ignored,” he said.

“The CFPA will work with the states and be able to prevent and root out unfair and deceptive practices against consumers by the financial services industry. It’s crucial to protect individual Iowa consumers from abuses, but it’s also critical to protect our whole economy,” Miller said.

“The financial crisis was caused at least in part by irresponsible mortgage lending and inadequate oversight. The crisis is the best demonstration of why we need better consumer protection and enforcement,” he said.

“This measure will fix a crucial problem,” Miller said. “Now, when it comes to mortgages, credit cards and other basic financial matters, consumer protection is buried and often neglected in federal regulatory agencies that have other priorities than protecting ordinary consumers. This bill would establish a Consumer Financial Protection Agency whose primary mission is protecting consumers.”

The Attorneys General argued that legislation should create an independent and strong CFPA, and also should explicitly preserve the states’ authority to fight unfair and deceptive practices. “The House legislation recognizes the key role played by state Attorneys General in spotting new frauds and abuses, responding to citizen concerns, and enforcing state laws,” Miller said. “It is very important to preserve that state authority.”

Miller: Big-bank arguments against the CFPA just don’t stand up.

“Contrary to what some big banks are saying, this will not create a so-called patch-work of regulation,” Miller said. “That argument may sound good, but it’s just not true. What is true is that the legislation will put 51 cops on the beat protecting consumers. We have just seen what can happen when there is only one cop -- and when that one is asleep at the wheel,” he said.

“A large number of businesses in all kinds of industries operate successfully across state lines every day,” Miller said. “They follow both state and federal laws, and they make a good profit. Why do the big banks think they can’t do the same? They can. It’s how they got big.”

Miller said computer software and other sophisticated compliance tools make any additional costs of state enforcement negligible. He cited one study that shows the cost of compliance with state anti-predatory lending laws to be about one dollar per loan. “It’s absurd to say that these sophisticated financial institutions can’t follow the rules unless the rules are tailor-made for their own profit and convenience,” he said.

“Remember, we are talking about stopping practices that will prevent people from losing their homes to unscrupulous schemes,” Miller said.

“This crisis was caused by a lack of effective regulation – not too much regulation. It is important that we learn our lesson and make sure such misconduct can never happen again.”

“We urge the Senate to maintain a strong and effective bill to protect the financial interest of ordinary Iowans and all Americans,” Miller said. “We urge the Senate to reject amendments on behalf of special interests that would weaken the bill and continue to leave consumers vulnerable.

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