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Akaka: Financial reform bill protects consumers, investors

MEDIA RELEASE

U.S. Sen. Daniel Akaka included several provisions in the Restoring American Financial Stability Act of 2010 that would increase access to affordable financial products for low and moderate income families, protect immigrants sending remittances, promote financial literacy, and safeguard investors. The bill was reported out of the Senate Banking, Housing and Urban Affairs Committee Monday, March 22 by a vote of 13-10.

Akaka’s provisions for consumers include:

Remittances

Immigrants often send substantial portions of their earnings to family members living abroad. They frequently use unregulated financial institutions which overcharge or sometimes fail to deliver the money.

“In Hawaii, many people remit money to their family members living in the Philippines and other Pacific nations,” Akaka said. “Many are often overcharged, and sometimes their hard-earned money never reaches their loved ones. Currently, remittances are not regulated under federal law. My amendment establishes basic consumer protections and a complaint and error resolution process for remittance transactions. Companies will have to provide key disclosures.”

Akaka’s amendment will modify the Electronic Fund Transfer Act to establish remittance consumer protections. It will require simple disclosures about the costs of sending remittances to be displayed in the storefront and provided to the consumer prior to and after the transaction. A complaint and error resolution processes for remittance transactions would be established by the legislation.

The Federal Reserve System would be required by the legislation to work on expanding the use of the automated clearinghouse system for remittance transfers to foreign countries, focusing on countries that receive the largest amount of remittances.

Increasing Access to Mainstream Financial Institutions

About one in four families in the United States are unbanked or underbanked. Akaka and Senator Herb Kohl (D-Wisconsin) included a provision to increase access to mainstream financial institutions for low and moderate income families that cannot afford to have their earnings diminished by reliance on high-cost and often predatory financial services.

“Growing up in Pauoa Valley, my family had limited means and like many Americans, we didn’t have a bank account,” Akaka said. “Without a bank or credit union account, families are unable to save for education expenses, home down payments, and other needs. The loss of a job, a large medical bill or even an auto repair bill can be financially devastating for these economically vulnerable families without savings. Banks and credit unions provide opportunities for savings and borrowing that improve the lives of working families.”

The amendment will authorize programs intended to assist low- and moderate-income individuals establish bank or credit union accounts. It will encourage the development of small, affordable loans as an alternative to more costly payday loans. It will enable community development financial institutions to establish and maintain small dollar loan programs.

Office of Financial Literacy

The legislation creates a new Consumer Financial Protection Bureau. Senator Akaka had included in bill a provision that creates an Office of Financial Literacy within the Bureau. This office will develop and implement initiatives intended to educate and empower consumers and develop a strategy to improve the financial literacy among consumers.

Akaka’s provisions for investors include:

Investor Advocate

Akaka inserted a provision to create an office of the Investor Advocate within the Securities and Exchange Commission (SEC) to ensure that the interests of retail investors are better represented.

The Investor Advocate will:
* Help retail investors resolve significant problems with the SEC or self-regulatory organizations (SRO).
* Identify areas where investors would benefit from changes in Commission or SRO policies
* Identify problems that investors have with financial service providers and investment products.
* Recommend policy changes to the Commission and Congress in the interests of investors.

Timely Disclosures for Financial Products and Services

Akaka had an amendment included in the final bill which clarifies that the SEC has the authority to effectively require disclosures prior to the sale of financial products and services.

“Investors must be provided with the relevant, meaningful, and timely disclosures they need to make informed investment decisions,” Akaka said.

Investor Financial Literacy Strategy

The SEC will be required to develop an investor financial literacy strategy intended to bring about positive behavioral change in investors. The Government Accountability Office will also conduct a study on mutual fund advertising to further examine recommendations intended to improve investor protections and ensure that investors can make sound financial decisions when purchasing mutual fund shares.

Akaka is a member of the Senate Committee on Banking, Housing and Urban Affairs. The Committee is chaired by Senator Chris Dodd (D-Connecticut), whom Akaka worked closely with to include the provisions listed above.

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