Two congressmen today threatened to move to have financial institutions put under the authority of the Federal Trade Commission unless federal regulators streamline their operations and better coordinate with states in protecting consumers.
Energy and Commerce Committee Chairman John Dingell, D-Mich., and Financial Services Committee Chairman Barney Frank, D-Mass., wrote that if such measures were not put in place, “we will be forced to consider steps such as the removal of the exemption for financial institutions and regulators under the FTC Act.”
The congressmen addressed the letter to Federal Reserve Board Chairman Ben Bernanke, Federal Trade Commission Chairman Deborah Majoras, Federal Deposit Insurance Corp. Chairman Sheila Bair, and the heads of the Comptroller of the Office of the Currency and the director of the Office of Thrift Supervision.
“Over the last several years the states, in the absence of strong federal action to enhance consumers’ rights, have implemented a host of important specific protections for consumers,” the letter said.
But regulatory actions by banking regulators have “significantly reduced the application of state laws and enforcement over a large part of the financial sector.”
Pre-emption of some state banking laws was recently ratified by a Supreme Court decision involving Wachovia Bank N.A. of Charlotte, N.C.
The disjointed regulatory system leaves consumers “with no idea where to turn when they have problems with a financial services provider,” the letter said, and dealing with federal regulators is “cumbersome.”
They cited the spike of home foreclosures in the subprime mortgage market as an example as an example of lack of consumer protection.
“These problems highlight the lack of clear federal policies and regulations to protect financial services consumers,” the letter said.
Currently, banks, thrifts, credit unions and insurance are exempt from regulation by the Federal Trade Commission.