By Angela Carter, Register Staff

State Attorney General Richard Blumenthal and three other attorneys general who support the creation of an independent, federal consumer protection agency posed a question to the U.S. Congress Tuesday: Whose side are you on?

Blumenthal said “snake-oil pitches have harmed consumers” and federal regulators have been complicit and failed to rein in deceptive lending practices.

Iowa Attorney General Tom Miller said consumer protection functions must be done in a separate agency to be effective for the public.

Under current structures, several regulatory agencies have a consumer protection component.

Each senator and representative must ask, “Am I on the side of the public or am I on the side of the big banks?” Miller said.

To critics of reform who say that innovation would be stifled by such an organization, Blumenthal said the country needs a financial guardian that would ensure another meltdown never occurs.

“Innovation would be stifled only when it includes deception,” he said.

U.S. Sen. Christopher J. Dodd, D-Conn., chairman of the Senate banking committee, said last week that Senate leaders hit an impasse in crafting the financial services reform bill.

The House passed its version in December.

“I’ve heard all the arguments for business as usual. But the American people have been through too much, unemployment is still too high, and the economy remains too vulnerable to support the status quo,” Dodd said in a statement. Continued...

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Dodd will not seek re-election to the Senate and Blumenthal has announced he will run for the Connecticut seat.

Blumenthal said the issue should not be handled in a partisan manner.

“Democrats and Republicans should be on the same side,” he said. “The consumers who are hurt by deceptive practices are both Republicans and Democrats.”

Edward Yingling, president and chief executive officer of the American Bankers Association, said in a statement that a new consumer financial regulator is unprecedented and would not be responsible for considering “institutional safety and soundness” along with consumer protection.

“ABA has consistently maintained that consumer protection should not be separated from safety and soundness in the regulation of insured depository institutions,” Yingling said.

Illinois Attorney General Lisa Madigan said investigations and enforcement against abusive lending practices began at the state level, with attorneys general sounding alarms since the late 1990s.

A final bill should allow states to pass laws that are tougher than federal laws when there is a need, she said.

“Federal banking regulators have a dismal record when it comes to protecting consumers,” Madigan said.

Ohio Attorney General Richard Cordray said 250,000 foreclosure filings have been initiated in his state in three years.

“It used to take us 25 years to get to those numbers,” he said. Continued...

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Contact Angela Carter at 203-789-5752 or acarter@newhavenregister.com.

Federal Letter to Connecticut/Credit Card Act 2009

Letter From AG Blumenthal/Credit Card Act 2009

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