Expanding Access to Financial Institutions

The Financial Services Committee is responsible for the oversight of the U.S. banking industry, which is one of the most successful banking systems in the world. This extensive system includes over 22,000 banks, thrifts, and credit unions. The Democratic Caucus’s philosophy toward overseeing financial services combines the goals of ensuring the soundness of the banking system with a commitment to providing all U.S. consumers the opportunity to participate in the system while being protected from abusive lending and information-sharing practices.

Members of the caucus have strived to expand access to basic banking transaction services by bringing more “unbanked” individuals into the traditional financial services system. Roughly 10 million Americans do not have an account with an insured depository institution. These “unbanked” consumers typically resort to non-traditional providers such as check cashers, which usually charge larger fees than mainstream institutions. The caucus pushed to include a provision in pending federal deposit insurance reform legislation that would give insured depository institutions a discount on the premium assessments for deposits providing “lifeline” accounts. Lifeline accounts are free or low-cost savings and checking accounts for low-income individuals.

To further encourage insured depository institutions to provide lifeline accounts, Committee Democrats also insisted that the Federal Deposit Insurance Corporation (FDIC) study efforts by federally insured banks and thrifts to address the problem of “unbanked” individuals. This study would take place every two years.

Democratic members have also insisted that provisions be added to recent legislation that would require the Federal Reserve Board to conduct annual surveys of banking services and fees. The survey, which has been conducted annually, has been a helpful source of information for consumers who are looking to find the most reasonably priced services.

Protecting Consumers’ Information

The Committee is also responsible for administration of the Fair Credit Reporting Act (FCRA), which, among other things, gives consumers the right to know what information is contained in their credit reports and to dispute any inaccuracies in the information.

Key portions of the Fair Credit Reporting Act are set to expire at the end of 2003.Several alarming studies have found that a significant percentage of credit reports contain inaccuracies, which have potential to cause a denial of credit or the need to pay a higher cost for credit.

Since decisions about access to credit, housing, insurance and employment are increasingly based on a consumer’s credit record and corresponding credit score, Democratic members will push for greater transparency of and accuracy in the use of credit information. The Democratic Caucus will work to ensure that improper collection, evaluation and distribution of credit information does not disparately impact people of color, women, or senior citizens. This effort will also include a review of the growing use of credit information by non-credit businesses, as in the cases when insurance companies use credit-based insurance scores to evaluate applicants and existing policyholders.

Predatory Lending

The extraordinary increase in subprime mortgage lending over the past decade has made credit and home ownership opportunities available to millions of consumers who could not qualify for conventional mortgages. The Democratic Caucus of the Committee has long advocated expanding access to credit for such consumers and this is a goal the Caucus continues to pursue. Unfortunately, the rise of subprime lending has also created what a 2000 Treasury-HUD joint report described as “fertile ground” for a variety of abusive practices collectively referred to as predatory lending. In recent years these practices--including deceptive marketing, undisclosed fee charges, excessive penalties and repeated refinancing of unaffordable debt–have stripped millions of hard working families of their equity, their savings and their homes. In geographic areas with high concentrations of predatory loans, the dreadful practice goes beyond affecting individual families to devastate entire neighborhoods and undermine the vitality of surrounding communities.

In 2000, members of the Democratic Caucus sponsored legislation to expand the protections of the 1994 Home Ownership and Equity Protection Act (HOEPA) to cover greater numbers of subprime loans and address other lending abuses. The House Republican leadership refused to consider this legislation arguing that since “predatory lending” could not be precisely defined, legislation would not address the problem. However, community activists turned to the states for action. Beginning with North Carolina in 1999, at least nine states have enacted comprehensive statutes or regulations aimed at stopping predatory practices. Other states have enacted more limited measures addressing specific lending abuses and state officials nationwide are alerting the public to the problem of predatory lending and educating consumers to help them avoid being victimized.

Efforts to enact federal anti-predatory legislation continue. However, some proposals would preempt all state predatory lending laws and weaken many current protections in federal law. The Democratic Caucus strongly opposes these efforts favoring a more balanced response that would enhance the protections in federal law and preserve the rights of states make their own consumer protection laws.

Financial Privacy

Committee Democrats were instrumental in drafting and enacting the federal financial privacy protections that Congress incorporated in the Gramm-Leach-Bliley Act of 1998. For the first time, all financial institutions were subject to an “affirmative and continuing obligation” to respect their customers’ privacy and to protect the security and confidentiality of their customers’ nonpublic personal information. Consumers gained important privacy rights including the right to know the information sharing practices of financial institutions, to restrict institutions from sharing their private information with unaffiliated parties, and to prevent sensitive account information from being disclosed for telemarketing.

The Democratic Caucus views the 1998 legislation as only a first step and has actively sought additional privacy protections to prevent unauthorized access to individuals’ confidential medical and health information, to combat financial fraud and identity theft, and to eliminate nuisance telemarketing. In 2000, Committee Democrats led the effort to pass the Medical Financial Privacy Protection Act, which would have required a provider to get a consumer’s advance consent (opt-in) before sharing his or her personally identifiable health and medical information (including information about medical-related payments) with any party. Even more stringent protections were also provided for especially sensitive information, such as treatment for mental health problems, substance abuse, or sexually transmitted diseases, as well as genetic information. Although the Financial Services Committee approved the legislation it was never brought to the House floor for consideration.

The need for stronger protections to combat identity fraud has also been a continuing concern of Committee Democrats. The Caucus has created a special Identity Theft Task Force, chaired by Darlene Hooley (OR), to study all aspects of the issue and recommend additional provisions to combat financial fraud and identity theft. Committee Democrats also strongly support regulatory efforts by the Federal Trade Commission to create a nationwide Do-Not-Call Registry to permit any consumer, with a single phone call, to block all unwanted telemarketing calls.