By PHILLIP LEE
Alternative financial institutions may apply for federal charters if a bi-partisan bill gains momentum.
Reps. Joe Baca, a California Democrat, and Blaine Luetkemeyer, a Missouri Republican, are sponsoring HR 6139, which would “create a Federal charter for National Consumer Credit Corporations, and for other purposes.” The bill, also known as “The Consumer Credit Access, Innovation and Modernization Act” was introduced on July 18.
Essentially, the bill would grant federal charters to alternative financial institutions.
Industry reaction to the bill has been mixed. The Online Lenders Alliance supports the measure, while the Community Financial Services Association and the Financial Service Centers of America are staying neutral.
“A federal charter, as opposed to the current conflicting state regulatory schemes, will establish one clear set of rules for lenders to follow. This will lead to the creation of innovative financial products for consumers demanding them,” says Lisa McGreevy, OLA president and CEO.
“CFSA, the storefront payday lenders association, does not advocate for this legislation since it does not include our products,” CFSA says in a statement. “Our member companies have long operated in a highly regulated environment — at both the state and federal level. Such regulation is effective, balancing credit availability and consumer protection. While we generally support innovative efforts like this to extend credit options to more hardworking Americans, this bill does not include the payday loan product offered by CFSA members and we are not working for its passage.”
“FiSCA is officially neutral on H.R. 6139, the Consumer Credit Access, Innovation, and Modernization Act,” says William Sellery, executive director of FiSCA. “We have not and are unlikely to be taking a position on this legislation.”
A CFSA spokesperson noted that the bill doesn’t cover institutions that offer loans for less than 30 days. Most payday loans are for a two-week period.
Backed by Cash America
A strong supporter of the legislation is Cash America, which believes HR 6139 will level the online playing field.
“On the Internet, you have a tremendous amount of competition that does not play by the rules that we do,” Mary Jackson, a senior vice president at Cash America, says in a published report, adding that regulations on the state level are “a competitive noose.”
The Ft. Worth, Texas-based company also has been ramping up its contributions to its political action committee. According to a published report, Cash America’s PAC is on pace to double its annual campaign contributions from the $200,000 it gave in 2007.
Even more interesting is that the proposed regulator of the credit corporations believes the bill would do more harm than good.
Concerns were expressed at a July 24 hearing on the legislation by Grovetta Gardineer, deputy comptroller for compliance policy office of the Comptroller of the Currency.