Earlier this month, our allies at the Center for Responsible Lending released a jaw-dropping report. In the midst of our current economic climate, their study found, bank revenues from overdraft-fees are up 35 percent, representing $23.7 billion in new profit for banks in 2008 alone.
How did banks increase their overdraft earnings by $6.2 billion over 2006 figures? By taking advantage of cash-strapped consumers who get charged an automatic overdraft fee — without offering them the chance to decline what ultimately amounts to a super-high-interest loan.
But overdraft fees aren’t the only problem in the banking industry. We’ve seen millions of homeowners burned by predatory mortgage lending, and millions of consumers struggling with mountains of debt from deceptive, confusing, or misleading credit card agreements. As Harvard law professor Elizabeth Warren explains, the Citibank credit card agreement was a page and a half in 1980 – now it’s 30 pages long.
While this spring’s credit card legislation was a good start, the time has passed for regulating each financial product separately. As soon as one piece of legislation takes effect, the mega-banks introduce a new end-run around it, or a new dubious practice.
That’s why the Consumer Financial Protection Agency’s (CFPA) time has come. This agency – first proposed by the Obama administration in June – would be the first agency tasked with watching out for the consumer in the financial products arena, a financial parallel to the agencies that protect consumers from harmful food or retail goods.
Legislation for this agency is about to be introduced in the House of Representatives. Please take time to send a message to your representative in the House to urge her or him to support the legislation, then post our editorial about the CFPA to your blogs and Web sites (and forward to your friends).
Finally, at the bottom of this e-mail, we link you to our recent resources on community investing and responsible banking. If you’re looking to break up with your megabank, we’ve got the resources to help you find a responsible checking account, responsible mutual funds and investments, and even responsible credit cards.
Here’s to responsible banking,
Alisa Gravitz,
Executive Director,
Green America
Action: Tell the House to Support the Consumer Financial Protection Agency
One of the major lessons of last year’s financial meltdown is that the government was not protecting consumers from harmful financial products and practices. Far too many consumers were pushed into mortgages they didn’t understand, with terms that were onerous or inappropriate for the borrower. Lenders and mortgage brokers often knew that what they were doing was wrong, but felt pressured to increase profits and knew there was no one to stop them.
Without regulation and consumer protection, the financial system will once again behave unethically, with disastrous results for consumers and the economy. There are already signs that such risky behavior is on the rise, just one year after economic collapse.
We need your help today to ensure that consumers will be protected. Your representative in the House needs to hear not only that you support the creation of a Consumer Financial Protection Agency, but that you support the strongest agency possible.
News: Post our CFPA editorial to your blog or Web site
Imagine a widespread E. coli outbreak that sickens millions of Americans. By the next year, the government determines that lax oversight exacerbated the problem and calls for restructured FDA regulations to protect consumers from tainted products.
In response, the industry cries foul. “These regulations will limit our innovations,” howl the food lobbyists. “Our customers deserve greater freedom of choice.”
Or, imagine an alternative scenario. Children’s toys contaminated with lead paint have been found on store shelves, so the Consumer Product Safety Commission responds with regulations to protect children from dangerous toys.
“No fair,” cry toy-company lobbyists. “Low-income consumers can only afford the lead toys. Why should the government punish low-income families by regulating toys?”
The above scenarios are fiction, of course, but the story arc is actually all too current. Much of the opposition from the banking industry to the proposed Consumer Financial Protection Agency (CFPA) has taken the form of variations on the above. …
Resources: Use our online resources to break up with your mega-bank
Break Up With Your Bank, Part One Use this resource to find links to responsible checking and savings accounts, background on community investing, and links to responsible credit cards.
Break Up With Your Bank, Part Two
Use this resource to learn more about targeting your community investing resources toward specific issues of interest, toward specific geographic locations, or toward specific recipient groups.
CommunityInvest.org
Use this resource to find the right community investing institution for you.
