Press Release March 10, 1998	Contact: 202/462-6262 Frank Torres, Torrfr@consumer.org Kathleen McShea, mcshka@ consumer.org Consumer Union Washington, D. C. Office

Consumers Union to Senate Banking Committee:
Don't Tolerate Deceptive & Unfair Practices, Reject Phantom "Reg Reform"

WASHINGTON Legislation now under review by a Senate banking panel threatens to turn back the clock on consumer protection by allowing the industry to return to deceptive and unfair practices outlawed decades ago.

"Congress needs to send a clear message to the banking industry that unfair practices will not be tolerated," Consumers Union legislative counsel Frank Torres told lawmakers during testimony before the committee delivered Tuesday. "Instead, this legislation harms consumers by opening the door for deceptive and coercive practices, harassment of consumers and higher costs for credit and homes. At a time when banks are expanding to provide a broader array of services and making more money than ever, Congress should be in the business of providing consumers with more protections, not peeling back the limited protections now in place."

According to the Federal Deposit Insurance Corporation, banks made over $50 billion in profits last year: an historic record.

At issue is legislation which has been labeled "regulatory reform" by its sponsors, Sen. Richard Shelby, R-Miss. and Sen. Connie Mack, R-Fl. (S. 1450).

Torres was particularly harsh in his criticism of provisions in this bill which would allow coercive sales practices aimed at getting loan applicants to buy products they don't need.

Banks have been prohibited from "tying" different products and services since the Bank Holding company Act Amendment were passed in 1970, and this consumer protection law has worn well over time. This rule, which means banks cannot offer consumers a product or service if it is contingent on the consumer purchasing all of the products or services, has succeeded in curbing coercive sales practices, Torres said.

Among those on record against rolling back the "anti-tying" rule are the Office of Thrift Supervision, the Comptroller of the Currency and even the Supreme Court. In a 1949 case, the court wrote, "tying agreements serve hardly any purpose beyond the suppression of competition."

Other provisions in this bill which Torres objected to include those that:

• give a green light for lenders to give mortgage kick backs;
  
• turn back the clock on the historic "Truth in Lending Law"; and
  
• put students in the bulls-eye of debt collectors without any of the protections from harassment that others carrying debt now enjoy.

NOTE: A full copy of the text of the testimony of Frank Torres is available on CU's Faxback line by dialing 202/462-7705, and selecting document no. 3805.