WASHINGTON - A coalition of consumer groups took aim Monday at the banking industry's plan for regulatory relief, proposing instead a four- point plan to reduce paperwork and enhance customer protection.
"Our proposals are meant to simplify the process and save consumers a significant amount of money," said Michelle Meier, government affairs counsel to Consumers Union.
The group said the relief legislation favored by the banking industry, which is pending before the House and Senate banking committees, guts consumer protection without reducing burden.
"That will return us to the era of buyer beware," Ms. Meier said. "It simply throws critical consumer protections out the window."
Banking industry advocates said they could support parts of the proposal, including a recommendation that Congress merge Truth in Lending and the Real Estate Settlement Procedures Act.
"That makes sense," said Karen Thomas, regulatory counsel to the Independent Bankers Association of America. "We have something like that in our proposal."
"I think it is almost miraculous that they are coming to the same conclusion on many of these things as we are," agreed Jim McLaughlin, director of regulatory affairs at the American Bankers Association. "That is, that there are an awful lot of requirements out there that get in the way of the bank dealing with the customer."
Other provisions - including those requiring lenders to include more information in loan disclosure statements - garnered considerably less support.
"We are going to disagree on some of the details," Mr. McLaughlin said. "But, we are glad to welcome them into the fold of eliminating needless paperwork."
But Edmund Mierzwinski, program director for U.S. Public Interest Research Group, said the public needs a total reform of the consumer laws, not a rollback. "Our package of reforms will help consumers, not hurt them like the banks want to do," he said.
The four-point plan would modernize a number of banking laws, merging disclosure requirements to eliminate conflicting statements and to reduce paperwork, the groups said.
Also, the groups would update the Fair Credit Reporting Act in an effort to better protect privacy rights and to boost accuracy, and they would eliminate the exemption for banks from many Securities and Exchange Commission rules.
Second, the coalition wants Congress to change several disclosures to make them more understandable. For example, it said consumers often misunderstand the annual percentage yield. Congress could clarify what the APY means if it requires banks to also include the interest rate and points on the same form.
Also, the groups want to eliminate a loophole allowing banks to change the terms of a loan before closing, provided they issue a new disclosure statement. And they said banks should disclose for variable loans exactly how they will calculate the new rate.
Third, the coalition said bankers should honor rate-lock agreements if they are responsible for delaying the closing the date. Finally, the group wants bankers to consolidate the forms they use and to rewrite some of them in easier-to-understand terms.
Banking advocates scoffed at this last proposal. "Most of the paperwork that comes out of banks is because of these disclosure requirements," Ms. Thomas said.
