Broad coalition backs federal legislative effort to protect consumers in financial marketplace
Advocacy representing both consumers and banking interests are applauding a legislative effort being led by Senator Sherrod Brown (D-Ohio) that would close what some call the "shadow banking" loophole.
The loophole in consumer banking law allows some nonbank entities to control a full-service FDIC-insured depository institution without being subject to the comprehensive set of rules designed to keep the financial system safe.
“Letting Big Tech and commercial companies operate banks without proper oversight will only open doors for predatory lending, invasions of consumer privacy, and broader financial instability,” said Brown. “To protect consumers’ pocketbooks and ensure a strong banking system for Main Street, we need to ensure all banking institutions play by the same rules.”
Banking interests support the effort as a way to protect their customers and the industry from less-regulated competitors.
“BPI supports Chairman Brown’s effort to close the ILC loophole and guarantee equal treatment for entities providing indistinguishable products and services under the law. Any entity seeking the benefits of bank ownership must be held to the same rules that apply to banks to prevent unacceptable risks to consumers, taxpayers and the existing financial framework,” said Ed Hill, Senior Vice President and Head of Government Affairs at the Bank Policy Institute.
Likewise, consumer advocacy groups are backing the measure.
“This legislation would end a dangerous loophole in the law that allows non-financial companies engaged in commerce to own a federal deposit insured bank without being subject to federal consolidated supervision and crucial consumer protections. This is an issue that has brought together the banking industry and consumer advocates out of common concern and a sense of urgency to fix the law before it’s too late,” said David Ferreira, Senior Government Affairs Manager at the Center for Responsible Lending.
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