Connecticut Attorney General's Office
Press Release
Attorney General To Testify In Favor Of President's Proposed Consumer Financial Protection Agency
July 13, 2009
Blumenthal is expected to speak around midmorning at the hearing, chaired by Sen. Christopher Dodd who has led the fight for stronger federal consumer protection. The hearing will be at the Senate Dirksen Senate Office Building in Room 538.
Blumenthal said that the proposed agency will have authority to investigate abusive consumer mortgages, credit cards and loans and prosecute companies found to have misled or cheated consumers. It will write rules requiring all consumer credit card and loan information be in clear, simple language, assuring people understand obligations they may wish to assume. It also will institute other safeguards to ensure consumers are treated fairly.
Blumenthal especially applauded provisions of the bill empowering state attorneys general to enforce state and federal consumer protection laws against credit card companies and nationally chartered banks. The Bush administration stripped states of authority to prosecute lending and credit card abuses by federally chartered institutions, contributing significantly to the mortgage crisis.
"The new agency is a necessary and appropriate response to exploding complexity, scope and scale of new financial instruments and markets -- and exponentially increasing impact on ordinary citizens," Blumenthal will say in his testimony. "It fills a deeply felt consumer need. Ever more slick and sophisticated marketing -- often misleading and deceptive -- cannot be battled successfully by states alone, or the existing federal agencies. Creating a new agency to fight consumer cons and abuse in alliance with the states, the federal government can muster more potent and proactive policing and prosecution.
"The point is to assure that consumers fully understand the financial realities and consequences of financial obligations, credit cards or loans, they are considering before they make commitments This agency's purpose is to assure people have good information so they can make good financial decisions. Once they use that information and make decisions, they will have to live with the consequences.
"The new agency -- a consumer financial guardian -- promises to be a powerful watchdog and protector, and a partner of state attorneys general in fighting for our citizens. The proposal marks a giant step toward restoring an historic federal-state alliance in combating financial fraud and abuse.
"The national financial meltdown was directly due to massive federal law enforcement failure -- lax or dysfunctional federal oversight and scrutiny of increasingly arcane, complex, opaque, risky practices and products. Federal law placed all enforcement and regulatory authority in an array of federal agencies that were inept, underfunded, complacent or complicit. The result was a void or vacuum unprecedented since the Great Depression.
"Robust state investigatory and enforcement authority no doubt would have revealed unfair and illegal activities sooner and helped fill the gap left by federal inaction and inertia. Putting state cops on the consumer protection beat would have sent a message -- educating the public, deterring wrongdoing, punishing lawbreakers.
"The Consumer Financial Protection Agency would have broad authority to promulgate and enforce rules to protect consumers from unfair and deceptive practices and to ensure they understand terms and conditions. These regulations will encourage, not stifle, the development of financial products that well serve consumers. A vibrant, competitive market that is fair and honest is essential to consumers' and the Financial Industry's financial interests. Clear rules and consistent enforcement are vital prerequisites for innovation and wealth creation.
"To mix metaphors, what's needed is a more level playing field -- essentially rational rules of the roads. When Intersections become busy, they need to upgrade from stop signs to traffic lights to avoid car crashes, collisions and pile ups. As the proposal recognizes, joint proactive consumer protection enforcement by both federal and state agencies -- without preemption or exclusive jurisdiction -- best serves consumer interests, especially as financial products and markets grow in complexity and number.
"I appreciate the industry's concern about two sets of agencies with enforcement authority. The industry justifiably wants predictability of regulation to properly plan product development and promotion. This bill will do so by creating a regulatory floor that applies nationwide. Most valuable would be predictability of vigilant and vigorous enforcement. The message must be that a revived and reinvigorated federal-state alliance will punish any company that profits from illegal anti-consumer devices or unfair and deceptive practices. The predictable outcome is that anyone who cons or scams consumers in financial products will be prosecuted."