Regulatory Failures Show Clear Need for an Agency Dedicated to Common-Sense Financial...

Regulatory Failures Show Clear Need for an Agency Dedicated to Common-Sense
Financial Protections for Consumers

WASHINGTON, July 13 /PRNewswire-USNewswire/ -- A new policy brief by the
Center for Responsible Lending chronicles the repeated failure of federal bank
regulators over the years to rein in irresponsible lending practices. Example
after example of regulatory delay or inaction demonstrates the need for a
stand-alone, independent regulator focused solely on ensuring basic,
common-sense safeguards for consumers.

Here are some examples of the regulatory lapses documented by CRL in its
policy brief, titled "Neglect and Inaction: An Analysis of Federal Banking
Regulators' Failure to Enforce Consumer Protections." For the full report, go
to:
http://www.responsiblelending.org/mortgage-lending/policy-legislation/regulators/regulators-failure-to-enforce-consumer-protections.html.
-- The Federal Reserve failed to write rules curbing unfair and deceptive
mortgage lending practices for more than a decade after Congress
directed it to do so.
-- Office of the Comptroller of the Currency (OCC) examiners in 2005
found
banks' standards for making mortgages had deteriorated; nonetheless
federal bank regulators as a group did not issue guidelines for making
or buying subprime loans for another two years, when it was too late
to
prevent the current fiasco.
-- The OCC did not exercise its consumer protection authority to address
unfair and deceptive practices for twenty-five years.

-- Black and Hispanic communities received a disproportionate share of
unfair and deceptive subprime home loans and as a result have suffered
a
disproportionate share of foreclosures and other financial distress.
Even as subprime lending grew and peaked from 2000 to 2006, the Office
of Thrift Supervision (OTS) made no referrals to the Justice
Department
for suspected race and national origin discrimination in mortgage
lending.

CRL believes that these and other failures demonstrate the need for a newly
configured regulatory framework, one that includes ONE agency equipped with
the powers it needs to provide the common sense safeguards that will benefit
consumers and business alike.

The Obama administration and several key lawmakers in Congress have called for
such an agency, which the White House would call the Consumer Financial
Protection Agency. For such an agency to succeed, it must be able both to
ensure that consumer protection rules are written fairly and to vigorously
enforce those rules first-hand, with onsite supervisory authority.

Federal regulators at the OCC, the OTS and the Federal Reserve now say they
understand that strong, sensible consumer protections are essential to a
strong economy. But as the Senate Banking Committee holds a hearing tomorrow
to examine the proposal for a new agency, lawmakers must keep in mind the
repeated failures of the existing regulatory framework to stop numerous
abuses. These failures show that fragmenting consumer protection
responsibility among regulators whose primary focus is bank safety and
soundness just doesn't work.

The OCC and OTS, which are funded by fees from the banks they charter and
regulate, have been reluctant to take actions that could cause an institution
to switch to another charter and regulator. This has led to a classic race to
the bottom, with each agency coming to view the banks it oversees as customers
rather than entities to be regulated. That has led regulators to not only
defend practices that hurt consumers, but also intervene to prevent state
authorities from acting to stop such
practices.http://sn105w.snt105.mail.live.com/mail/InboxLight.aspx?FolderID=00000000-0000-0000-0000-000000000001&InboxSortAscending=False&InboxSortBy=Date&n=978568096
Even the Inspector General of the U.S. Treasury -- home to the OCC and the
OTS -- has given these two regulators failing grades when it comes to ensuring
that financial products won't blow up in the hands of consumers who buy them.

Regulators' failure to make consumer protection a priority has caused
widespread economic disruption, at great cost to financially distressed
borrowers as well as to taxpayers. From home loans to credit cards to bank
overdraft fees, the financial services arena is replete with bad practices.
Each is a painful reminder of why America needs to revamp its oversight of
financial services: We must never again forget that strong consumer safeguards
are the underpinning for a safe and sound banking system.

About the Center for Responsible Lending

The Center for Responsible Lending is a nonprofit, nonpartisan research and
policy organization dedicated to protecting homeownership and family wealth by
working to eliminate abusive financial practices. CRL is affiliated with
Self-Help, one of the nation's largest community development financial
institutions.

SOURCE Center for Responsible Lending

Kathleen Day, +1-202-349-1871, kathleen.day@responsiblelending.org, Ginna
Green, +1-510-379-5513, ginna.green@responsiblelending.org, or Charlene
Crowell, +1-919-313-8531, charlene.crowell@responsiblelending.org, all of the
Center for Responsible Lending