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August 3, 1999
Dear Conferee:
As the Conference on financial modernization legislation gets underway the Consumer Federation of America, Consumers Union, and the U.S. Public Interest Research Group recognize the pivotal role that the Senate and House Conferees will play in shaping how consumers will fare under this new law. As a Conferee you have the opportunity to provide consumers with the tools they need to participate in the new financial world that H.R. 10/ S.900 will create.
We urge you to consider the following issues as you begin your discussions:
· Give Consumers Control over their Financial Data Privacy: Consumers should be told how their personal financial information is being used and given the option of telling the institution not to use their data. This consumer choice should apply to the use of information by any entity with which the institution is going to share the data, including third parties and affiliates. An even stronger protection would be that information should not be disclosed for any other purpose than for which it is given without the prior consent of the consumer.
· Enact Strong and Effective Retail Sales Protections: These include: disclosure that products banks sell are not FDIC-insured and subject to risk of loss; anti-coercion rules that prohibit a financial institution from peddling uninsured products until after the loan has been made; suitability requirements to make sure sales are based on consumers' financial needs, not solely the commissions and fees; a requirement that sales activities be conducted in an area separate from where deposits are taken and loans made; and a process for consumers who lose money when banks violate these rules to recover their losses. The bill should ensure that consumers are not subjected to less than any minimum protections in federal law.
· Ensure Access to Financial Services: This bill will allow financial institutions to expand their activities, thereby exposing taxpayers to more risk, even though these same institutions are under no duty to provide services to those same taxpayers. Depository institutions taking advantage of new powers should provide basic bank accounts -- non-subsidized accounts that limit customer transactions in exchange for lower minimum and opening balances. Congress should also ensure that communities do not lose out by intended or unintended rollback of applying the Community Reinvestment Act where appropriate.
· Preserve Rights of PolicyHolders of Mutual Insurance Companies: The bill should not include a provision that would allow life insurance companies to change their state of residence without the permission of the state regulator, unless that state has enacted a law authorizing mutual holding companies (MHCs). Otherwise, MHCs could allow mutuals to avoid compensating policyholders when they convert to stock form. Mutual insurance companies, unlike stock companies, are owned by their policyholders. When a mutual converts to stock form, policyowners are entitled to adequate compensation for their ownership interest.
· Repeal Exemption of Banks from Investor Protection Rules: The outdated and unfair exemption of banks from securities laws must be repealed. Consumers deserve the protection of securities laws wherever they may purchase securities.
· Preserve the Authority of States to Protect their Residents: Congress should preserve and clarify the authority of states to regulate businesses operating within their borders, including national banks, and allow states to protect their residents. For example, a bank should not be able to hide behind its national charter and evade state usury laws.
· Improve Disclosure of Costs and Fees: To help promote comparison-shopping and competition, it is essential that consumers know and understand the costs of the products they are considering.
· Limit Taxpayer Exposure to Risk: Financial modernization legislation should not create increased risk for consumers by opening the ability of banks to own commercial firms. The bill should close the unitary thrift loophole.
· Oppose Other Special Interest Giveaways: It is likely that various industry groups will to attempt to add special interest provisions to the conference-such as adding portions of the so-called regulatory relief bill. Among other onerous provisions, this bill includes the payment of interest on reserves that will cost taxpayers hundreds of millions of dollars. A financial modernization bill that includes little for consumers should not be made even more unbalanced with more giveaways to financial institutions.
As a Conferee you have the ability to ensure that all Americans will have the opportunity to benefit from financial modernization. Positive resolution of these issues will promote competition in the marketplace as well as protect consumers. Consumers deserve a marketplace that competes on price, quality products, and service. Without these reasonable protections consumers stand to be left out.
We look forward to working with you and your staff on these, as well as other important issues, arising during the Conference on financial services modernization legislation.
Sincerely,
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Travis Plunkett |
Frank C. Torres, III |
Ed Mierzwinski |
