The “Consumer” Protection Panel That Isn’t

It was with some fanfare that the Federal Reserve announced that it would create a Consumer Advisory Council to provide advice regarding issues from a public perspective.

Now you might think, aha, a Consumer Advisory Council…wouldn’t that be a panel which consists largely or entirely of, er, well, consumers?

You might think so, but the Federal Reserve plainly disagrees. In a call for nominations it wants would-be appointees to list their organizational affiliation as well as “positions held in community and banking associations and on councils and boards.”

Why on earth would a consumer panel need MORE banking representatives? The whole point of a consumer panel is to represent borrowers and depositors, the people who use banking services and not the people who profit from them.

Lobbyists & The Federal Reserve

It’s not like the banking lobby is unknown to the Federal Reserve. Indeed, it’s often difficult to tell the difference between government “regulators” and the industries they allegedly regulate.

For instance, under the Home Ownership Equity Protection Act of 1994 (HOEPA), the Federal Reserve by “regulation or order, shall prohibit acts or practices in connection with (A) mortgage loans that the Board finds to be unfair, deceptive, or designed to evade the provisions of this section; and (B) refinancing of mortgage loans that the Board finds to be associated with abusive lending practices, or that are otherwise not in the interest of the borrower.”

As the Philadelphia Federal Reserve Bank explains, “it is important to note that while the existing HOEPA provisions only apply to high-rate or high-fee non-purchase loans, the Board’s HOEPA rulemaking authority applies to all mortgage loans. HOEPA authorizes the Board to prohibit any mortgage act or practice if the Board finds it is unfair or deceptive and to prohibit any mortgage refinancing practice if the Board finds it is abusive or not in the interest of the borrower.”

Notice that the Fed’s power applies to all loans, not just subprime mortgages.

Of course, the Federal Reserve never exercised such authority. You know the rest of the story, it’s called the mortgage meltdown and it’s largely responsible for today’s financial mess.

Would you like to serve on the consumer panel? Would you like to recommend someone? For details see the Federal Reserve Consumer Advisory Council application.

Good luck….

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