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Press Release |
Contact: Jean Ann Fox/California Federation of America |
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WASHINGTON - Consumers Union and Consumer Federation of America commended the Clinton Administration today for its package of consumer protections for financial services.
The financial services industry is experiencing rapid change. While some of it may bring more competition and choice to consumers, the changes have left consumers vulnerable to privacy invasions, rip-offs and unfair dealing.
"Banks and other financial firms have been catering to the wealthy while leaving middle and lower income consumers stuck with exorbitant fees, high interest rates and lousy deals," said Mary Griffin, counsel for Consumers Union. "Financial firms should serve all consumers, not just those swimming in extra cash, and in a fair and honest manner."
The Administration's proposals, if enacted, go a long way to help inject honest and fair dealing into a marketplace that increasingly fails to meet the needs of modest and lower income consumers.
Borrowers have found themselves in greater debt when they find the terms of their credit card agreement are not what they appeared on the application. Financial firms have become masters at the marketing frenzy of seeking out new customers, invading our mailboxes and telephone lines with abandon and almost no checks on their practices.
"Strong and accurate disclosures for credit cards are needed to ensure consumers know what they're getting into and help put a hold on an industry run amok," said Frank Torres, legislative counsel for CU. "This proposal addresses some of the abuses in the market and will help consumers get a fair deal on their credit cards."
Consumer laws have not kept pace with current market practices. "The failure to update consumer protections has left many consumers subject to higher prices, substandard service and other forms of unequal treatment, " said Jean Ann Fox of Consumer Federation of America. "The financial services and bankruptcy bills currently before Congress must ensure that the changing marketplace benefits all consumers, not just the wealthiest."
The principles and recommendations announced today would go a long way to help all consumers get a fair deal in today's financial services market. Of course, in the absence of legislation, these principles hold little meaning. We will be working with the Administration and Congress to help turn these principles into meaningful legislation. Some of the measures announced today provide:
· Financial Privacy: Consumers should have control over whether and how their financial information is shared. The proposal calls for informed consent before banks and other firms share or sell information about consumers' financial dealings.
· Access to Low-Cost Bank Services: The 48 million households who keep $1,000 or less in their checking accounts are being nickel-and-dimed to death with fees. These families, along with the 12 million families without any checking account, need a break - a limited low-cost account for their basic bank needs would help many families. The initiative calls for access to basic bank services at affordable prices for all Americans.
· Honest and Fair Credit Card Deals: Consumers are often unaware of hidden terms when swamped with credit card offers. This proposal calls for full disclosure of required payment due dates, applicable late payment penalties, and permanent interest rates. The initiative also proposes that consumers be informed of how long it will take to pay off their credit card bills and how much they will pay if they are only making the minimum payment.
· Protections Against Deceptive and Misleading Practices by Banks: Consumers have been misled about whether insurance and investment products banks sell are FDIC insured or subject to risk of loss of principal. The Administration's initiative would put much-needed "teeth" into the regulatory "guidelines" that address some of the misleading and deceptive practices of banks.
· Guaranteed Terms for Mortgage Loans and Prevention of Predatory Lending Practices: Homebuyers are told the cost of their mortgage too late in the process, typically only after fees are paid. Once disclosed the terms of the deal can change. The initiative calls for homebuyers to get loan information early so they can shop for the best deal and for guaranteed loan terms so there are no surprises at closing. The proposal also supports protections against unfair predatory lending practices.
· Prevention of Coercive and Costly Sales of Credit Insurance: Credit insurance, insurance sold in conjunction with a loan, is a massive rip-off for consumers, who often have no idea what a bad deal they're getting. The initiative would address coercive practices by banning the sale of credit insurance while the loan application is pending and help prevent consumers from being overcharged.
· Protections when Debit Cards are Lost or Stolen: Although laws protect credit card holders from unauthorized transactions, the laws have not been updated to include unsecured "debit cards" that require no PIN number. This means that a consumer's bank account can be drained, putting the burden on consumers to fight to get their money back. The initiative calls for updating the law and limit consumer liability on these cards.
