WASHINGTON — Rep. Carolyn Maloney (D-N.Y.) has been a key playeron many issues relating to financial services and economic policy.Most recently, she was the primary sponsor of legislation thatwould change many of the rules regarding credit cards. The billrecently passed a House subcommittee and a similar bill wasapproved by the Senate Banking Committee. Maloney recently spokewith Credit Union Times about a range of economic and financialservices issues.
Credit Union Times: As head of the Joint Economic Committee, canyou tell us when is the recovery going to start?
Carolyn Maloney: We hope it's starting now. I just came fromC-SPAN, and they announced that the number of jobless claims hadgone down. That's a good economic indicator. So I think theeconomic indicators are going to start turning around. It's abouttime. We are certainly doing everything we can to help the Americaneconomy.
CU Times: As a member of the Financial Services Committee, you'vehad a front-row seat on the events that caused the currentsituation we're in. What regulatory fixes would you like to seethat will decrease the likelihood of it happening again?
Maloney: Many of the problems were caused by lack of transparency,lack of regulation. There was a whole sense that deregulating andself-regulating was the way to go, and we are now in the worsteconomic crisis of our time. So I think moderate and fairregulation is good for industry and good for American citizens. Weare having a series of hearings on a systemic regulator that wouldhave an umbrella over all institutions though there would be otherregulators but there would be one over the entire system.
We also have a problem in that we have huge swathes of thefinancial services sector that aren't regulated. Credit unions areregulated, and they haven't been part of the problem; they've beenpart of the solution. But from our hearing [recently] about AIG, welearned about the credit default swaps, which were unregulated, thederivatives that were unregulated and the risky products that wereunregulated. This needs to be corrected, but we need to be careful;we need to be deliberative.
CU Times: Which agency should be the systemic regulator? Some saythe Fed, others say the Fed does not have a good track record inthis area.
Maloney: A lot of people criticize placing it in the Fed becauseone of its primary focuses is monetary policy, and they feel itmight be too much responsibility in addition to their coreresponsibility of ensuring the safety and soundness of financialinstitutions, consumer protection and monetary policy. Myexperience with Chairman Bernanke in terms of consumer protectionhas been a positive one.
My credit card bill of rights, which credit unions supported partsof, cracked down on some of the most abusive practices by issuersof credit cards. Chairman Bernanke supported it, and it's the onlycredit card reform that has ever passed either chamber of Congress.Chairman Bernanke put forward a rule that adhered to the principlesof my bill, and 56,000 Americans expressed support for the rules,the largest comment response ever. But we want to go forward withmy bill even though the rule is in place because thesepractices-which the Fed has called “unfair, deceptive andanticompetitive”-are going on and we want to stop them sooner. TheFederal Reserve has supported the bill.
CU Times: The credit unions have said they like some things but areconcerned about others, such as the rules about overdraftprotection programs. How do you strike a balance between protectingconsumers and allowing card issuers like credit unions to managerisk?
Maloney: When we wrote our bill, we had conversations with all thestakeholders. We had a roundtable where we established principlesto be adhered to and one of the results of that is there are nocaps on interest and fees. But it cracks down on the most abusivepractices such as any-time, any-reason rate increases.
It stops double-cycle billing where they are charging interest on abalance that's already been paid. That's terribly unfair and thebill stops the tricks and traps that caught consumers unaware, suchas saying a rate was for a lifetime, and then changing it orchanging the due date so consumers were late with theirpayment.
What is telling about the bill is that some card issuersvoluntarily adhered to the principles, such as Citibank and Chase,but then reversed that decision when others in the industry didn'tbecause they didn't want to be at a competitive disadvantage.That's not fair to consumers. But the outrage about credit cardabuse is strong.
One of the worst is raising rates for no reason and then making itretroactive, thus making it hard for consumers to pay down theirbalance.
The bill does allow for a risk analysis and does allow that ifsomeone doesn't pay their balance on time an interest rate can beincreased but then a consumer is given 45 days to decide if theywant to opt in to the higher rate.
CU Times: Your district has been on the front lines of the economicdownturn because many of your constituents work for big financialinstitutions and large financial services companies like Citigroupare in your district. How do you balance the populist outrageagainst some of the abuses without stifling Wall Street?
Maloney: I study all aspects and try to be fair to both theinstitutions and consumers. In the credit card bill, while thereare some bills that cap interest rates, mine doesn't. I am a bigbeliever in transparency and choice and letting consumerschoose.
On ATMs, for example, when they first became widespread, there weremany bills that would have forbidden banks and credit unions fromcharging a fee for their use. I thought that was too restrictive.If you are providing a service to the community, you should be ableto charge for it, but let consumers know the charges and thendecide. So I put in a bill that said when you withdraw your moneythey had to show that there was a fee and a consumer could decideif they want to opt in.
Credit cards are a contract between the issuer and the consumer butthe issuer got to make all the decisions and it was veryunbalanced.
CU Times: One of the other parts of regulatory restructuring thatcredit unions are concerned about is ensuring that the NCUA remainsan independent agency. You expressed support for that when youspoke at CUNA's conference. What's the likelihood that it will staythat way when the restructuring is done?
Maloney: There have recently been some regulatory improvements,such as making the insurance coverage of up to $250,000 permanent[which passed the House and is pending in the Senate] and the Housepassed a bill to allow credit unions to provide more services tounderserved areas. And the House also passed an amendment allowingfor five years to replenish the insurance fund, which I backed.Under the systemic regulator, there will be other regulators and Ibelieve the NCUA will be kept.
Credit unions perform an important service and their tax-exemptstatus allows them to provide an important service to underservedareas. One of the reasons I am such a strong supporter of creditunions is that I represented Greenpoint, Brooklyn where the Polishand Slavic Federal Credit Union became the major community center.I also represented at one time East Harlem and the South Bronx, andduring the 80s many of the banks closed and redlined, and thecredit unions stayed and provided the services. I was deeplygrateful; everyone deserves to have access to financial productsand services.
CU Times: Rep. Eddie Bernice Johnson introduced a bill to expandthe reach of the Community Reinvestment Act to include otherfinancial service providers, including credit unions. What are yourthoughts about the bill?
Maloney: CRA has been a very successful program. Any proposedchanges will be thoroughly reviewed. We'll have hearings on it I'msure. It will be deliberated and debated and as a member of thatcommittee I would like to reserve judgment until the hearings takeplace.
–[email protected]