H.R. 1909, sponsored by Rep. Joe Baca (D-Calif.), would establish a federal charter that would not only block state consumer protection laws but also allow non-bank institutions to bypass the CFPB. The measure has support from co-sponsors in Arizona, California, Georgia, Illinois, Maryland, Mississippi, New Mexico, New York, North Carolina, Ohio, Texas and Wisconsin, The St. Louis American reports.
Several states throughout the U.S. have passed stringent consumer protection laws against non-bank lenders. If the legislation is enacted, non-bank lenders would no longer be required to comply with the Truth in Lending Act, which requires disclosure of credit costs as an annual percentage rate.
The legislation would benefit pawn shops, rent-to-own businesses, payday and car title establishments, check-cashing companies and businesses that offer reloadable prepaid debit cards. Individuals that would be negatively affected by the legislation include under-banked and unbanked American consumers, according to The St. Louis American.
The Consumer Federation of America announced its opposition to the legislation, saying that the group “oppose[s] any steps intended to remove non-bank lenders from the oversight of the [CFPB],” according to The St. Louis American.
The Center for Responsible Lending has also spoken out against the measure, saying that the rule would re-expose American consumers to dangerous practices that contributed to the recent economic crisis.
“The CFPB was created for the sole purpose of protecting consumers through oversight, rule-making and enforcement of the rules for the very consumer financial products marketed and sold by the companies covered in this legislation,” the group said, The St. Louis American reports. “H.R. 1909 or similar legislation would backtrack on Congress’ promise to consumers. These bills offer nothing new or beneficial for consumers—and removing consumer finance companies from CFPB oversight will set a precedent for many other companies to also seek to be excluded.”