Consumer Groups Urge Regulation of Nonbank Financial Institutions

New York Times
March 5, 2010
Chan, Sewell

The debate surrounding consumer protection has primarily focused on banks; but lawmakers are beginning to weigh the how and why of tightening control of nonbanking institutions, such as payday and title lenders, that target lower-income customers and are already far less regulated than banks. The Obama administration addressed nonbanking industries in its initial regulatory revamp legislation with the proposal for a consumer financial protection agency, but the most recent version from Sen. Christopher J. Dodd excludes the nonbanking companies from the watchdog's oversight. Dodd's proposed agency could write rules for nonbank financial companies and enforce them for nonbank mortgage companies, but a body of regulators would have to be petitioned in order for it to have authority over other nonbank financial companies. Consumer advocates assert that an agency that has full authority over bank and nonbank sectors is needed, as there are at least five times as many nonbanks as there are credit unions and banks. "We want this agency to have full authority over nonbank sectors," insists Edmund Mierzwinski of U.S. PIRG. "This is authority that nobody has today." One source of support for the regulation of nonbank financial institutions is the Defense Department, which seeks greater protection for service members and their families in light of complaints about unscrupulous automobile sales and financing practices.
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