Progress Illinois

Yesterday, the proposal to create a Consumer Financial Protection Agency (CFPA) cleared a major hurdle when it passed the House Financial Services Committee. Regular readers know that the future of the agency -- which has been a top priority for consumer advocates critical of the federal government for its lax regulation of predatory lending and other risky financial products -- has seemed touch-and-go at times. After months of heavy lobbying by the banking industry and the willingness of the conservative "New Democrats" (led by Illinois' own Melissa Bean) to do their bidding and weaken the agency's proposed powers, the CFPA bill (H.R. 3126) was approved with its teeth largely intact.  That being said, portions of the original bill were certainly weakened, according to the Wall Street Journal:

Lawmakers made several significant changes to the White House's original proposal during a week of debate, particularly in response to lobbying from business groups. For example, they voted overwhelmingly to exempt automobile dealerships from any scrutiny by the new agency, a major win for dealerships that rake in high fees from auto financing. That change may not make it into the final version of the legislation.

The agency would be charged with policing consumer financial products and practices, such as mortgages, credit cards, and overdraft fees, regardless of whether they are offered by banks, finance companies, or most any other type of firm.

Consumer advocates are keeping the pressure on to see that some of those banking-friendly concessions are reversed as the bill winds its way through Congress.

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Big banks have been doling out wads of cash and stepping up political pressure on Capitol Hill in an effort to kill a package of new consumer protections. But following the latest surge in profits, along with a series of decisions to hand out historic bonuses at a time when consumers are being saddled with exorbitant fees and arbitrary rate hikes, they are losing sympathy in Washington. Even Illinois' own Rep. Melissa Bean, who agreed to introduce an amendment that would weaken the proposed Consumer Financial Protection Agency (CFPA) as the lead negotiator for the "New Democrats," appears to be taking the side of the consumers advocates who've been giving her an earful lately. The Washington Post has the details:

Large banks are on the verge of losing a key legislative battle over the shape of financial reform, an unusual setback that reflects the continued political backlash over their role in creating the financial crisis [...]

The debate came to a head last week. Bean's group said it would propose an amendment to retain the current [preemption] law. Liberals warned that if the amendment drew enough Republican support to pass, they would oppose the broader legislation to create the new agency. House leaders and the White House pressured Bean and the moderates to fall in line.

Despite tremendous pressure from the banking industry, Bean ultimately agreed.

We put out a call to Bean's office and her spokesman said only that "it's unclear" what will transpire in the House Financial Service Committee tomorrow. However, The Hill reports that Bean plans to introduce her amendment then withdraw it with the understanding that the issue will be discussed if and when the measure makes it to the House floor. The Woodstock Institute's Tom Feltner tells us that the latest developments are a step in the right direction but the battle over consumer protection is far from over.

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Illinois' own Melissa Bean has become a divisive figure on Capitol Hill these days. As the lead negotiator for the New Democrats, the North Suburban congresswoman has become a key ally to the financial services industry as they continue to fight the creation of a Consumer Financial Protection Agency (CFPA). As we recently noted, Bean is thought to be preparing a banking-friendly amendment that would water down the long-overdue consumer protections being pushed by the Obama administration. According to Reuters, she's poised to act sooner rather than later:

A Democratic lawmaker hopes to derail congressional efforts that would allow states to adopt stricter laws for firms offering mortgages and other financial products, a source familiar with the matter said on Monday.

Democratic Representative Melissa Bean could as early as Wednesday propose an amendment to a House of Representatives bill that would remove a provision giving states more rights over federal laws to protect consumers from risky financial products, the source said.

While the language of Bean's amendment has yet to be unveiled, the goal is apparently to preempt states' authority to set and enforce the sort of strict rules that would protect unwitting consumers from getting gouged by risky financial products. Among the outspoken critics of a preemption clause is Illinois' own Attorney General Lisa Madigan, who has repeatedly made the case for why more robust state rules are essential to protecting consumers. The Woodstock Institute explains:

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We gave Chicago Rep. Luis Gutierrez a hard time about his role in negotiations over credit card reforms last spring. By adding an amendment to the House bill allowing the industry one year to change its practices before the new laws would be enforced (which was later bargained down to nine months), Gutierrez gave credit card companies leeway to jack up interest rates and fees on existing customers for no reason other than sheer greed. At a hearing in Washington yesterday, Gutierrez clapped back, accusing the financial services industry of exploiting his legislative goodwill:

"We were reasonable; we were fair. The banks were not," said Rep. Luis Gutierrez (D., Ill.), during a House Financial Services Committee hearing, adding that so-called "swipe fees" were "outrageous."

Gutierrez and a group of House Democrats don't seem willing to appease the banks any longer.

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When the House and Senate passed the Credit Card Holders’ Bill of Rights Act this past spring and President Obama signed it into law, it was widely seen as a signal that Congress was prepared to buck the financial services industry and support consumers across America. But an amendment added to the bill by Illinois Rep. Luis Gutierrez made the reforms much more palatable for the credit card companies. Gutierrez ensured that the banks -- whose business models are designed to exploit average Americans -- would not be forced to change their practices until one full year after passage. (In the Senate, this was bargained down to nine months.) On its surface, this provision seemed innocuous enough; the industry claimed they needed the delay to adjust their systems to the new rules. But since the bill's passage, they've actually used the grace period to raise interest rates and fees on existing customers in an attempt to turn a quick profit before regulators clamp down.

Some of the Democrats who originally opposed the timeline have now had enough. Reps. Carolyn Maloney (D-NY) and Barney Frank (D-MA) have introduced legislation (H.R. 3639) to speed up implementation for most of the reforms by three months. This change would be hugely important for consumers stretching their budgets to cover holiday gifts and family travel. On Thursday, Frank's House Financial Services Committee will hold a hearing on the proposal. We'll be doubling back to see what Gutierrez and his Illinois colleagues Reps. Melissa Bean, Bill Foster, Donald Manzullo, and Judy Biggert make of the change.

(H/T Mike Lillis)

Image used under a Creative Commons license by Flickr user pladys.

Last week, the House Financial Services Committee Chair Barney Frank (D-Massachusetts) finally rolled out a draft proposal (H.R. 3126) to create a consumer protection agency that would be tasked with regulating the risky financial products -- subprime mortgages, credit cards, payday loans --  that have brought American consumers to their knees. Considering that entire city blocks are mired in foreclosure and thousands of households are buried in high-interest rate credit card debt, it's not surprising that there's overwhelming public support (PDF) for the federal government to provide oversight of the get-rich-quick instruments cooked up by Wall Street. But after months of deliberation, the proposed bill is weaker than many had hoped. Even so, banks are still unsatisfied, arguing that the reforms are too cumbersome.  And it appears that Illinois Rep. Melissa Bean (D) is lending them a hand by proposing to strip the Consumer Financial Protection Agency (CFPA) of even more regulatory power. Politico reports:

[M]oderates, who are members of the centrist New Democrat Coalition, are unhappy with proposed bill language that would force federally chartered firms to comply with state consumer protection laws. The moderates want to maintain the status quo, in which financial institutions that elect to have a national charter are exempt from additional state consumer protection laws.

Rep. Melissa Bean (D-Ill.), a lead negotiator for the New Democrats, told POLITICO on Tuesday that their position on pre-emption would most likely be offered as an amendment rather than changed by Frank in the existing bill, though talks are still ongoing.

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Wall Street may be ratcheting up its efforts to weaken financial regulatory reform, but under the leadership of Illinois' own Sen. Dick Durbin a growing number of elected officials have made it clear that they won't be bullied by the banks. Today, they garnered a key ally as President Obama joined their push for the creation of a Consumer Financial Protection Agency (CFPA). But as the legislation is taken up in the House Financial Services Committee this month, a looming question remains: Will Illinois representatives who appear on the fence -- such as Republicans Judy Biggert and Don Manzullo and Democrats Melissa Bean and Bill Foster -- make consumer protection a priority? Or will they cower to the deep-pocketed financial services industry?

Encouragingly, the Daily Herald editorial board today reminded these members of Congress that they have "a key role in fixing the lack of oversight that contributed to this mess." In other words, they need to stop protecting the predatory practices of the financial service sector. From the editorial, headlined "Fix the system that led to collapse":

We share the concern about added demands on business, particularly smaller operations such as community banks and reputable local lenders. We also hesitate to endorse the creation of yet another government agency.

However, the system that was manipulated to qualify the unqualified needs fixing. As we've seen, this is not only about the high-risk borrower. Even the most financially sophisticated people have been affected by this economy.

The time to fix problems is now, while the wounds of the financial crisis are fresh.

The editorial also quotes the Woodstock Institute's Dory Rand noting that the existing federal regulatory structure is weakened by the absence of a federal agency whose "primary mission" is to enforce rules that are already on the books. And Americans have paid dearly -- via subprime mortgages, sudden interest rate hikes, and other predatory practices. Creating a central CFPA to streamline oversight is a reform that a majority (57 percent) of Americans favor, according to a recently released poll (PDF) commissioned by the nonprofit Consumer Federation of America.

It's been less than three months since opponents squashed Sen. Dick Durbin's mortgage modification bill -- a common sense proposal to stem the spread of foreclosures. After dumping millions of dollars of campaign contributions into the coffers of Wall Street-friendly lawmakers, the banking lobby probably thought their work on the issue was done for the time being.

But it looks like they were wrong. According to Mike Lillis of the Washington Independent, leaders of the Senate Judiciary Committee have scheduled a hearing for tomorrow morning titled: "The Worsening Foreclosure Crisis: Is It Time to Reconsider Bankruptcy Reform?" The answer to that question seems clear. Anger is simmering in Washington over bureaucratic delays in the Obama administration's "Making Home Affordable" plan, which has secured only 50,000 successful loan adjustments since it was launched in April. Meanwhile, foreclosures continue to stack up. Already this year, the Center for Responsible Lending estimates that 56,872 new foreclosures have been filed in Illinois alone. After his bill died in the Senate this spring, Durbin said he wanted to revisit the issue as soon as possible. The hearing tomorrow will hopefully give us some sense of whether that is going to happen.

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Determined to curtail the financial industry's stranglehold on American consumers, Sen. Dick Durbin began pressing months ago for the creation of an independent agency that would protect consumers from predatory practices. Reining in the banks' extraordinary political power on Capitol Hill hasn't been easy. In what seemed like a sign of progress, legislation to create a Consumer Financial Protection Agency (CFPA) surfaced in the House last week. But consumer watchdog groups such as Illinois' own Woodstock Institute (WI) aren't ready to cheer yet.

The reason? Since the proposal was initially floated by the White House, a key safeguard has been stripped from Massachusetts Democratic Rep. Barney Frank's bill (HR 3126). The provision in question would have left the modernization of the Community Reinvestment Act (CRA) in the hands of the newly-created watchdog agency -- rather than the financial services industry. Letting Wall Street-interests control the rewrite, WI argues, would weaken the expansion of loans to borrowers and communities of color. And they say allowing federal banking regulators to continue to enforce the CRA would have the equally negative effect of stifling development in impoverished communities.

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Amid the turmoil in the General Assembly this week, environmentalists and consumer groups quietly earned a big victory on Thursday night, passing a sizeable energy efficiency reform package (SB 1918) through both chambers. Originally introduced as a migrant labor bill, an amendment attached to the measure -- crafted with the help of Attorney General Lisa Madigan's office -- transformed it into a clearinghouse for energy reform initiatives intended to lower the state's gas consumption and ultimately save consumers money. 

What will the law do? For starters, it will establish an energy efficiency program for natural gas utilities, similar to a law already on the books for electric companies. Designed to reduce natural gas usage 8.6 percent by 2020, the law requires utility companies to implement "cost-effective energy efficiency measures" to meet an annual, incremental natural gas savings requirement. By May 2012, for example, utilities must cut their savings by 0.2 percent. The next year, the savings goal doubles. If the utilities hit their targets, the Midwest Energy Efficiency Alliance projects that Illinois consumers could save over $10 billion on their utility bills between now and 2030. In order to achieve the reductions, utility companies will ask consumers to finance energy efficiency upgrades by rolling the costs into their monthly bills. (How that'll play out practically has yet to be worked out.)

There are also financial penalties for utilities that miss their targets: companies serving over 1.5 million customers must pay $600,000 into the Low Income Home Energy Assistance Program (LIHEAP) each year they fall short. The penalties are smaller for utilities serving between 500,000 and 1.5 million people ($400,000) and those serving less than 500,000 ($200,000).

So why did the utilities endorse the bill?

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