Wednesday, May 18, 2011

Elizabeth Warren discusses the need for clear contracts and common sense reforms at Rep. Van Hollen's Consumer Protection event

MCRC had a great night meeting consumers, sharing information and learning from consumer protection leaders at the financial forum Rep. Chris Van Hollen hosted in Silver Spring Tuesday night.
MCRC staff met hundreds of consumers and shared information about how to buy a used car, the debt settlement industry, our legislative victories in Annapolis, our new documentary film on victims of financial fraud as well as ways to keep abreast of consumer issues in Maryland.
Presidential adviser Elizabeth Warren’s spoke about the financial challenges facing middle-class and working-class families and the important role the new Consumer Financial Protection Bureau can play in redressing those challenges. Professor Warren powerfully and clearly explained how 30 years of wage stagnation coupled with the rise of predatory financial and mortgage-lending practices led to the financial crisis that caused the most serious recession in the last 70 years. First, falling incomes pushed more and more families to go deep into debt, not only to maintain their standard of living but to pay big bills for medical care, education and other basic needs. Then, a deregulated lending industry used low up-front costs to entice millions of families into mortgage deals whose rising rates many families simply could not afford. Ultimately those deals crashed the nation’s economy, Warren insisted, “one bad mortgage at a time.”
Warren spoke passionately about the need for a federal regulatory agency whose first job is to protect consumers – rather than the bankers – and about her work to get the new Consumer Financial Protection Bureau (CFPB) off the ground.
Rep. Van Hollen strongly endorsed the CFPB and won great applause when he called on President Obama to appoint Ms. Warren to lead it, even if he has to name her as a recess appointment to get around the opposition of congressional Republicans hostile to Ms. Warren and the CFPB.
Maryland Attorney General Doug Gansler, Director of the Montgomery County Office of Consumer Protection (and MCRC Board Member) Eric Friedman and representatives from the Federal Trade Commission and the Montgomery County State’s Attorney’s Office  also explained their consumer protection work to the large and attentive crowd and took questions about consumer concerns.
With so many fine speakers and engaged citizens on hand, the forum was a lively learning experience for all of us. Thanks to Rep. Van Hollen and the Montgomery County Office of Consumer Protection for hosting the forum and for inviting us to participate.

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Tuesday, May 17, 2011

Consumer Reforms Work-Credit CARd Act saves money and helps consumers

A new report from the Pew Center  makes clear that the Credit Card Act of 2009 has been a strong success for consumers, saving us billions in late and penalty fees as it prevents unfair rate hikes and other deceptive practices. You can see Pew’s findings and report here:  http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Credit_Cards/Report_Equilibrium_web.pdf  Pew’s  findings offer an important reminder that well-designed reforms can protect consumer interests, make markets more transparent and earn a level of public support that allows them to endure shifts in the political winds.
The Credit Card Act protects consumers by limiting when credit card companies can raise rates on existing balances, banning “unfair and deceptive” practices and requiring late fees and  penalty fees to be “reasonable and proportional.” When the law passed in 2009, critics charged that credit card companies would have to raise interest rates and annual fees on cards sharply and deny credit to many consumers to make up for the limits on penalty fees the law imposed. Two years later, Pew’s data shows that the critics were wrong.
Interest rates and the percentage of cards charging an annual fee did rise slightly after the law was passed (increases that likely have as much to do with the credit crunch caused by the financial crisis of 2008-2009 as the reform bill itself). But those rate hikes were modest and the interest rates and annual fees charged by credit card companies appear to have now stabilized again. 
At the same time, consumers are now paying much less in late and penalty fees as a result of the reform law. Since the Federal Reserve last year issued rules to enforce the credit card reform act that limit late fees to $25 to $35, the average amount late fees cost consumers has fallen sharply. Only 11 percent of bank credit cards now charge overlimit penalty fees (down from 23 percent in 2010 and 80 percent before the reform bill was passed in 2009). 
Nick Bourke, director of Pew’s Safe Credit Cards Project, sees strong evidence of the reform bill’s success: “The Act created a new equilibrium where interest rates have flattened, penalty charges have declined and a number of practices deemed ‘unfair or deceptive’ have disappeared,” he concludes.
Sen. Mark Udall of Colorado, Rep. Carolyn Maloney of New York and other participants in the panel on the new law the Pew Center sponsored on Capitol Hill w law last week also stressed that the credit card reform bill has been such a success for consumers that even the House Republicans trying to eviscerate the Consumer Financial Protection Bureau and other important consumer reforms passed by the last two Congresses show no interest in seeking to reverse the Credit Card law.
The moral of the story, they suggested, is that once effective consumer reforms are in place, they become so popular with consumers that there is little political appetite for trying to roll them back. 
That’s a lesson worth remembering as we work to get the Consumer Financial Protection Bureau off the ground and give the other important consumer reforms Congress passed between 2007 and 2010 the chance to work.

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