What the Federal Reserve Is Doing About Consumer Protection

Sandra Braunstein, Director of the Federal Reserve Board's Division of Consumer & Community Affairs, testified before the House Committee on Oversight and Government Reform Subcommittee on Domestice Policy today. 

Director Braunstein discussed the Federal Reserve Board's consumer compliance supervision, which includes administration of the Community Reinvestment Act and fair lending laws, especially the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA).  She noted that, "One objective of our consumer compliance examination program is to identify and control compliance risks before they harm consumers."

During 2007, the Fed has referred six cases of ECOA violations to the Department of Justice for prosecution.  These cases involved:

ethnic and racial discrimination in mortgage pricing,

racial discrimination in the pricing of automobile loans,

restrictions on lending on Native American lands,

restrictions on row house lending that discriminated on the basis of race,

discrimination against unmarried people in the underwriting of consumer loans, and

discrimination on the basis of marital status by improperly requiring spousal signatures.

My take:  Congress has all the federal bank regulatory agencies on the hot seat about consumer protection for two reasons:  1.  The subprime mortgage meltdown has resulted in so many foreclosures that Congress must at least talk about solutions to the underlying lending issues; and 2.  Since federal preemption has eliminated the state authority to address consumer protection issues in banking, the federal regulators need to step up to the plate.

LInk:  http://www.federalreserve.gov/newsevents/testimony/braunstein20071024a.htm

(ag) Oct. 24, 2007, in Consumer Protection