To the Editor:
The Consumer Financial Protection Agency, the new consumer watchdog agency proposed by the Obama administration, must be endowed with broad authority protect consumers and communities from the financial industry's worst practices ["In Rush for New Agency, Key Details Up in the Air," July 13]. The version being debated in the House will go a long way toward protecting consumers, but it does not give the new agency the authority to protect communities from discriminatory practices. To do so, the CFPA must have the authority to implement and modernize the Community Reinvestment Act and we call on Chairman Frank and members of the House Financial Services Committee to reinstate this important provision.
Historically, the success of the Community Reinvestment Act has been largely due to the strong incentive financial institutions have to comply in a satisfactory manner. As a result, the importance of a strong community commitment has always been understood at the highest levels of bank management. When the CRA was aggressively implemented during the 1990s, banks successfully marketed safe and affordable loans to low-wealth people and helped millions into sustainable homeownership. If the millions more who received unaffordable or deceptive loans had instead received loans from CRA-covered institutions, the current financial landscape would be very different.
With foreclosures continuing to rise, vacant properties accumulating and property values declining, it is time to once again aggressively implement the CRA. The best way to do so is to put the CRA under the purview of the CFPA, recasting consumer protection as a community development issue, and vice versa. As the CRA has demonstrated, safe and sustainable loans build stronger communities. Likewise, when consumers choose safe financial products, their communities are unquestionably better off. A Consumer Financial Protection Agency that monitors the community responsibility of financial institutions will ensure that the interests of consumers and communities are protected.
Clearly, policymakers in Washington understand this. The bill proposed by Chairman Frank goes a long way to balancing the need for increased consumer protections and protecting financial institutions' ability to deliver innovative products, but the community development mandate of the Community Reinvestment Act must be restored, to the CFPA, to protect communities as well. This is a first, crucial step to keeping at least a portion of the financial industry honest and ensuring that the economic recovery is shared by consumers and communities alike.
Dory Rand, President