IIAA Hails Senate Banking Panel Action To Protect Consumers
The debate turned on a provision in the Financial Regulatory Relief and Economic Efficiency Act (S. 1405) that would have eliminated a Bank Holding Company Act statute that prohibits banks from tying approval of a loan to the purchase of non-banking products, such as insurance. The bill was offered jointly by Sens. Richard Shelby (R-AL) and Connie Mack (R-FL).
IIAA strongly opposed elimination of the pro-consumer credit tie-in language and was successful in urging senators to keep the anti-tying statute on the books, says Wilson, who is chairman of the board of Wilson Insurance Agency, Inc., Chula Vista, CA.
"Credit tie-ins are blatantly anti-consumer because they force people to buy non-banking products they neither need nor desire," he says. "IIAA has fought credit tie-ins since early this century. To remove this pro-consumer protection would have unleashed a wave of high-pressure and currently illegal activities that would inundate consumers.
"The Senate Banking Committee's decision to retain the credit tie-in statute will help ensure that consumers should not be hit up with needless coercive sales tactics that play on their fear of losing credit," Wilson says.
Executive Vice President Robert A. Rusbuldt says IIAA worked very closely with Senate Banking Committee Ranking Democrat Paul Sarbanes (MD), Sens. Richard Bryan (D-NV), Chris Dodd (D-CT) and other Senate members to ensure that the important federal law was not repealed.
Rusbuldt adds that it was a curious move for the banking industry to pursue repeal of this provision while Congress still is actively engaged on financial services modernization. "It is peculiar that the banking industry would seek to repeal this provision at this critical juncture as we are negotiating on potential Senate financial services reform legislation and the future of bank-insurance sales," he says.
"A prohibition on credit tie-ins has been a basic consumer protection that has been universally accepted in the financial services industry for many years," continues Rusbuldt. "During this era of deregulation in the financial services marketplace, these types of consumer protection measures are more important than ever. If anything, Congress should be looking to do more to safeguard consumers from the coercive power that banks wield in the credit process instead of rolling back the protections already in place."
IIAA Senior Washington Representative Thomas C. McCrocklin says after IIAA raised its concerns with the credit tie-in repeal measure on Capitol Hill it was able to help create a consensus among Senate Banking Committee members that this controversial provision of the so-called Shelby/Mack bill had to be removed. McCrocklin adds that the committee's decision on this issue will have an impact on negotiations on comprehensive financial services reform legislation.
"Retaining current law in this area is an important building block on creating consensus on passage of financial services reform legislation," says McCrocklin. "Frankly, had the Senate Banking Committee actually repealed the credit tie-in statute, it would have severely complicated negotiations on financial services reform and made it much harder to reach consensus on broad-based modernization legislation."