Continued...

But the success of both of these bills relies on their being reviewed during one of those “moments in time” when Congress decides to create good laws that genuinely benefit the public. Otherwise, they may be weakened beyond recognition or not passed at all. And the outcome is of immense importance to those who work to eradicate poverty in America.

The Consumer Financial Protection Agency

The most recent and significant opportunity to increase bank regulatory oversight and enforcement occurred on July 1, 2009, when President Obama proposed the creation of the Consumer Finance Protection Agency (CFPA). His concept was to take CRA and all of the existing fair lending and consumer protections away from the bank regulatory agencies and instead establish a consumer-focused agency to enforce these laws.

On July 9, 2009, Rep. Barney Frank, chairman of the House Financial Services Committee, offered HR 3126 to create the Consumer Financial Protection Agency. The bill is significantly weaker than the one offered by President Obama for a number of reasons.

First, Rep. Frank excluded CRA altogether from the proposed CFPA. Instead, he chose to leave the oversight of this critical law to the same regulators who had failed to enforce it for many years.

On Sept 20, 2009, in a memo to fellow members of Congress, Rep. Frank dealt three additional blows to the presidents original proposal. He amended HR 3126 by removing a product requirement that would have helped LMI and minority neighborhoods gain greater access to better products. He also removed the president’s “reasonableness” standard that would have required banks to guarantee that borrowers understood the products they were signing up for.

Finally, Rep. Frank changed the composition of the new oversight body from presidential appointees (consumers and citizens) to bank regulatory agencies. Under the House version of this bill, the oversight of the new “consumer” protection agency would revert to the Federal Reserve Bank, the OCC, OTS, NCUA, FDIC, FTC, and other government agencies—the same agencies whose lack of enforcement forced Congress to amend the consumer laws in the first place.

Finally, an additional amendment exempted nearly 8,000 of the eligible 8,200 from being examined by the CFPA.

Immediately after Rep. Frank announced these disappointing changes, community groups like NCRC and Americans for Financial Reform wrote to request that he return many of these provisions to the bill. But one group issued a press release on September 23, 2009, expressing its pleasure with these new changes: the American Bankers Association (ABA). The ABA continues to oppose the agency even in its weakened form; at the same time, it is pushing for more amendments, including one that would allow the agency to preempt state consumer protections—something that would be a disaster for LMI and minority neighborhoods.

But there is hope for a bill that more substantially helps all consumers, and in particular those living in LMI and minority neighborhoods. On November 10, Sen. Chris Dodd offered his own version of the Consumer Finance Protection Agency (within a broader bank reform bill) that restored all of the amendments that had been lost in Rep. Frank’s committee. Sen. Dodd’s CFPA language is nearly identical to that offered by President Obama, and community groups across the country are now mobilizing to support the initiative.

A law is only as good as the sheriff responsible for enforcing it. The CFPA creates a new sheriff with real authority, whose primary mission is to protect consumers. If Sen. Dodd’s and President Obama’s version of the CFPA passes, the opportunity for fair and equal access to quality credit and banking services would be dramatic.

The CFPA bill was eventually rolled up into a larger regulatory reform bill called Wall Street Reform and Consumer Protection Act (HR 4173). As Shelterforce goes to press, that bill is being debated, along with the over 250 amendments that have been attached to it. An ongoing concern is an amendment that would allow the agency to preempt existing state laws that currently protect consumers.

The CRA Modernization Act of 2009

There is more good news on the financial horizon. The long-awaited bill to expand and strengthen CRA was introduced on March 12, 2009 by way of the leadership of Rep. Eddie Bernice Johnson (D-Texas) and Rep. Luis Gutierrez (D-Ill.) who announced the CRA Modernization Act (HR 1479) at NCRCs annual conference.

This bill makes several critical changes to the Community Reinvestment Act as it currently stands—all of which would dramatically increase lending, services and investments in LMI and minority neighborhoods.

The bill:

• Expands the number of financial institutions that would fall under CRA, including independent mortgage companies and mainstream credit unions;

• Closes loopholes that allowed banks subsidiaries to avoid being considered or covered for CRA purposes;

• Strengthens the CRA exam by creating more specific and defined grades;

• Requires that race be considered under CRA exams;

• Expands a banks CRA assessment areas to include regions where the bank does a significant amount of business, whether or not it has branches there;

• Enhances the small business data disclosure currently required of banks to include the amount of individual loans and the race and gender of the borrowers.

To date, 60 members of Congress have signed on to sponsor the bill. But its passage depends on the House Financial Services Committee and a decision by its chairman, Rep. Frank, to promote this bill or some revised version of it. Frank has said that he will not take this bill up now, and that it will have to wait until early 2010.

Rein in Lending Abuse

This Congress acted expeditiously to financially support the banking sector to prevent its collapse and further damage to our national economy. They now owe it to the American public to pass legislation that is going to rein in lending abuses, to protect consumers and expand financial access to fair and responsible loan products and services. As community advocates and organizers, we owe it to our constituents to not leave these improvements and opportunities for another day or another Congress.

Congress needs to understand that the public will support strong and decisive initiatives to end abusive lending practices, but the public will not stand for doing little or nothing to address the needs of blue-collar workers. Legislators should be concerned about the outrage of those who have seen their wealth eroded by abusive lending practices and watched their neighborhoods move from poverty to devastation. They should fear the segment of the middle class that is slipping into the ranks of the lower income, growing in numbers and becoming increasingly dissatisfied.

This is a critical moment for everyone concerned with financial justice in America, and the opportunities to address economic inequities and to promote financial inclusion have never been greater. The majority of the public is clear on this: banks and Wall Street have been helped, and it is now time to help consumers by establishing strong consumer protections and increased access to responsible lending. The question is whether politicians will exhibit the leadership and courage necessary to translate this moment in time into one of opportunity and promise. Will this Congress be known as the “faux Congress” that talks a lot, proposes a lot, but in the end passes only weak and minimally helpful bills, such as the recently passed credit card bill? Or will it pass a strong Consumer Financial Protection Agency Act and an enhanced Community Reinvestment Act that will pay dividends to consumers and the U.S. economy for years to come?

The battle shifts now to the U. S. Senate, and it is fair to say that whatever is accomplished on the House side of Congress forces the Senate to act and is therefore important and valuable. But we will all be looking to the leadership of Sen. Dodd, Sen. Harry Reid, and Sen. Dick Durbin to restore much of what was lost on the House side and to raise the bar on regulatory oversight and consumer protections.

John Taylor is president and CEO of the National Community Reinvestment Coalition.