Bill Would Curb Oversight of Payday Loans; Pawnshops, Check-Cashing Places at Issue
Byline: Cory Brown, WASHINGTON TIMES
A group of bipartisan lawmakers is pushing a plan to exempt pawnshops, payday lenders, check-cashing stores and installment lenders from oversight by President Obama's new consumer finance watchdog agency, saying the oversight could restrict credit and economic opportunities for lower-income and inner-city customers.
But the Consumer Federation of America and other advocacy groups say the move runs the risk of undercutting a key power of the new Consumer Finance Protection Board (CFPB) while leaving vulnerable borrowers prey to risky, high-interest loans that leave families and small businesses high, dry and deeper in debt.
The bill, sponsored by Rep. Joe Baca, California Democrat, and lawmakers from more than a dozen states, would establish a new federal charter for non-bank lenders that would not only bypass the CFPB but also effectively block many state-level consumer protection laws.
Mr. Obama's 2010 financial regulatory overhaul gave the new consumer financial agency broad powers to oversee both bank and non-bank lenders. A number of states already regulate quick loans with rules on interest rate caps, loan limitations and disclosure forms.
But Mr. Baca and other bill sponsors say their proposal is meant to establish a vibrant, safe, and commercially viable market for underbanked and unbanked individuals to gain access to financial services and products.
The Federal Deposit Insurance Corp. estimates that more than 60 million low- and moderate-income consumers in America have little or no access to traditional commercial banks. The rates are even higher for blacks, Hispanics and other minority groups.
Prominent consumer rights groups, including the Center for Responsible Lending and the Consumer Federation of America, have come out against the bill. The Office of the Comptroller of the Currency, which would issue the new non-bank charter under Mr. Baca's bill, does not have the same primary mandate to protect consumer interests, they argued.
This shift exposes consumers and the financial services marketplace to the very dangers that contributed to the economic crisis, the letter said. …