Wins and Losses Tally for Consumers in House Bank Bill
WASHINGTON -- Consumers Union said the financial modernization bill which passed the House of Representatives by a one vote margin last night includes important gains for consumers but urged the Senate to do better.
"While the legislation falls short of addressing all consumer needs, Consumers Union is pleased lawmakers in the House give consumers some important wins that will help them get better service and avoid scams," said CU attorney Mary Griffin, who advocates preserving and enhancing consumer protection laws as banks merge with securities and insurance firms. "This bill is a mixture of victories and setbacks for consumers and we intend to work with the Senate to seek improvements."
WINS
- Prevents confusion and deceptive practices when banks sell insurance and investments:
- Consumers must be told if the insurance and investment products they sell are not FDIC-insured or guaranteed and subject to risk of loss;
- Insurance and securities sales activities must be conducted in an area separate from where they take deposits and make loans;
- Banks cannot condition credit on the sale of other products;
- Consumers who lose money when banks violate these rules can recover their losses;
- Bans insurance discrimination for domestic violence victims when policies are sold by banks.
- Investors will have the protections afforded under securities laws regardless of where they purchase securities;
- For the first time, depository institutions affiliated with financial services holding companies must offer basic banking accounts with reduced fees for consumers who cannot afford to meet large monthly balance requirements.*
LOSSES
- Countless state consumer protection laws may be wiped out -- including ATM surcharge fee prohibitions -- by a poisonous preemption provision;
- Mutual insurance companies converting to stock get to avoid state laws providing policyholders with adequate ownership compensation;
- Securities and insurance affiliates are clear of any "Community Reinvestment Act"- like obligations to communities, which are needed, particularly in low and moderate income areas.
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