Protecting Consumers

Restoring Rules of the Road to Wall Street

The economic collapse may have started on Wall Street, but it’s Main Street where small businesses and families are still suffering from unemployment, frozen credit, and the threat of foreclosure.  Congress passed and President Obama signed the Wall Street Reform and Consumer Protection Act, but there is much work left to do to fix our broken financial system and make it work for middle-class families and small businesses again.

In his position on the Senate Banking Committee, Senator Merkley has worked hard to bring about tough new reforms and is committed to ensuring they work.  Taking risks and speculative investing are an important part of capitalism, but people and firms that take risks need to be prepared to suffer the losses.  If we can’t afford to let the bank take the losses, it shouldn’t be taking the risks.  Never again should any financial firm depend on taxpayer-funded “Wall Street welfare” to bail them out if they make risky bets. 

Turning this common sense concept into reality, Senator Merkley led the effort to crack down on high risk speculation – proprietary trading – at our depository banks and other critical financial firms.  The Wall Street Reform and Consumer Protection Act included the Merkley-Levin amendment that will make sure that high-risk trading no longer jeopardizes the banking system on which families and small businesses depend and put clear limits on conflicts of interest to keep Wall Street honest.

Recognizing that failures in consumer protection were at the root of both the financial crisis and foreclosure crisis, Senator Merkley has also been a vigorous supporter of the new Consumer Financial Protection Bureau (CFPB).  The CFPB will end hidden tricks and traps buried in fine print that bleed families’ wallets, like $35 cups of coffee when debit cards are overdrawn or late fees incurred because credit card companies hold onto payments before depositing them. 

Rebuilding the Housing Market

As Director of Portland Habitat for Humanity, Senator Merkley saw firsthand how home ownership transforms families.  A home provides the foundation for families to thrive and for children to reach their full potential. 

Sadly, today, Americans are at a greater risk of losing their homes than at any other point in recent history. Millions of Americans have lost their homes to foreclosure in the last few years, and thousands more remain at risk of losing their homes in the near future.  The epidemic of foreclosures is not just devastating for the families directly involved, it drags down home values for everyone and is an anchor holding back our economic recovery.  As a member of the Senate Committee on Banking, Housing and Urban Affairs, Senator Merkley is deeply committed to passing legislation that protects borrowers, reduces foreclosures and helps keep people in their homes. 

A significant contributor to the foreclosure crisis was that a huge number of families who qualified for affordable prime loans – more than half at the peak of the subprime boom – were instead advised by mortgage brokers to take out high-cost, high-risk loans. To prevent predatory lenders from directing families into bad loans in the future, Senator Merkley successfully passed two bills as part of the Wall Street Reform and Consumer Protection Act to end deceptive mortgage lending practices.  The first banned hidden steering payments or kickbacks to mortgage originators who directed homeowners into high-cost, high-risk mortgages that they cannot afford over the long term. The second prohibits lenders from including costly prepayment penalties that prevent homeowners from refinancing into a more affordable loan.

To speed the recovery of the housing market, Senator Merkley supports aggressive efforts to create refinancing alternatives to costly and time-consuming foreclosures, including allowing federal bankruptcy judges to modify existing mortgages so they can keep their home under new terms.  Current law allows federal bankruptcy judges to modify the terms of debt repayment for virtually all loans, including loans on luxury items like sports cars, yachts, and vacation homes, but it doesn’t allow families to restructure their mortgages.  Middle-class families should have the same lifeline option as yacht-owners.

Cracking Down on Predatory Payday Lenders

As economic hardship hits families across the country, many Americans are being forced to turn to short term payday loans with massive interest rates just to deal with day-to-day expenses.  If not paid off right away, the costs of loans can balloon to more than 400 percent of the original loan, causing financial burdens that are practically impossible for families to escape.

As Speaker of the Oregon House of Representatives, Merkley led an effort to crack down on predatory payday lenders in Oregon.  Merkley was successful in imposing a 36 percent interest rate cap on state-regulated consumer loans and limits on check cashing fees. In 2009, Merkley cosponsored the Protecting Consumers from Unreasonable Credit Rates Act, a bill that would require payday lenders in every state in the country to abide by that same 36 percent interest rate cap.

Many states don’t have the protections that are now in place in Oregon and Senator Merkley is working to provide these safeguards for all Americans.  Specifically, Senator Merkley supports capping payday loan interest rates, requiring payday lenders to report to credit bureaus, and empowering the Federal Trade Commission to crack down on deceptive practices.