The Honorable Gerald B.H. Solomon
Chairman
Committee on Rules
H-312, The Capitol
Washington, D.C. 20515

Dear Mr. Chairman:

We are enclosing 55 copies of a consumer protection amendment that we request be made in order to be offered to H.R. 10, the Financial Services Act of 1998. While we disagree sharply on other aspects of this legislation, and separately are submitting amendments to address those concerns, we are in full agreement on the need for the House to approve strong consumer protections as part of any financial modernization legislation. We would appreciate the opportunity to testify at the Committee's hearing on the rule for H.R. 10.

As requested in your letter of March 19, 1998, we are providing a brief explanation of our consumer protection amendments:

1. The substitute maintains the ability of the Federal Reserve Board to enforce the banking laws across the new financial holding companies as to nonbank affiliates, but it inexplicably deletes the provisions enabling the SEC to make inspections of investment bank holding companies to monitor and enforce compliance with the federal securities laws. Our amendment restores the SEC's enforcement authority.

2. The Republicans claim that the substitute will create one-stop shopping and more competition, resulting in the delivery of more efficient and cheaper services. However, the substitute appears to set the stage for a confusing array of new products and services, and a plethora of new fees and commissions. Our amendment directs the financial regulators to review existing disclosure requirements and, where needed, to promulgate rules requiring financial services providers to give consumers and investors clear and meaningful disclosure of all fees and commissions.

3. The substitute permits banks, insurance companies, and securities firms to affiliate in the new financial holding companies. If activities are moved out of the bank and into holding company affiliates, these assets and the revenue generated by them will not be available to support Community Reinvestment Act investments in communities, including the needs of low- and moderate-income neighborhoods and persons of modest means. Our amendment requires that the Secretary of the Treasury, in consultation with the Federal bank regulators and the SEC, devise a program to address this shortcoming and report legislative recommendations to implement that program to Congress in one year.

4. One of the eligibility requirements for the new financial holding companies is that all subsidiary insured banks offer and maintain low-cost basic banking accounts. But this requirement alone is excluded from the subsection on the Federal Reserve Board's enforcement of the eligibility requirements, leaving life-line banking without an enforcement mechanism. Our amendment corrects this oversight.

5. The substitute will create financial conglomerates with access to invasive personal financial information on the American public. Our amendment requires the Federal Trade Commission, which is engaged in an ongoing multi-stage study of consumer privacy issues, to report to Congress on its findings and conclusions, together with recommendations for legislative and administrative action to protect the privacy of consumers.

6. The substitute requires the Federal banking agencies to prescribe anticoercion rules applicable to the sale of insurance but does not require general sales practice rules that address suitability. Our amendment provides that general sales practice rules be included in the bill.

7. The substitute would allow weak state consumer statutes and regulations that are "inconsistent with or contrary to" the regulations prescribed by the federal banking agencies to preempt stronger federal regulations. Our amendment provides that the stronger state consumer protections will prevail, but, in any case, the federal regulations will provide a minimum level of protection.

Thank you for your assistance and cooperation in this matter. We look forward to working with you on this important legislation.

Sincerely,

JOHN D. DINGELL
RANKING MEMBER
COMMITTEE ON COMMERCE

JOHN J. LAFALCE
RANKING MEMBER
COMMITTEE ON BANKING AND
FINANCIAL SERVICES

cc: The Honorable John Joseph Moakley, Ranking Member
Committee on Rules

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