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Akaka speaks in support of financial reform

MEDIA RELEASE

Sen. Daniel K. Akaka delivered a speech Monday, April 26 on the floor of the U.S. Senate urging his colleagues to support legislation to reform America’s financial system and protect, educate, and empower consumers and investors.

The legislation includes a number of provisions authored by Akaka.

A few hours later, the Senate voted on a motion to proceed to formally debate the legislation. This “cloture” vote requires a 60 vote super-majority, and was not agreed to by a vote of 57 in support to 41 opposed.

Following the vote, Akaka said: “It is unfortunate that we were blocked from debating the merits of the bill. We have an obligation to reform our financial system to make it fairer for working families.”

Akaka’s remarks as prepared for delivery:

Enactment of emergency legislation in the fall of 2008 to stabilize the financial markets and the economy brought with it an obligation to reform our financial system to make it fairer for working families.

I support S. 3217, the Restoring American Financial Stability Act of 2010. I appreciate all of the extraordinary work done by the Chairman of the Banking Committee, and his staff, on developing this vital legislation.

I, along with many of my colleagues on the Committee, worked together to develop a bill that protects, educates, and empowers consumers and investors. The legislation incorporates many ideas from members of both parties. We must act quickly to enact this bill.

A lack of consumer protection was a core cause of the financial crisis. Prospective homebuyers were steered into mortgage products that had risks and costs that they could not understand or afford. We must do more to protect consumers. This legislation includes essential protections that do so.

The new Consumer Financial Protection Bureau has tremendous potential for restricting predatory financial products and unfair business practices. The Bureau will work to prevent unscrupulous financial services providers from taking advantage of consumers.

The legislation also creates an Office of Financial Literacy within the Bureau. The Financial Literacy Office is tasked with developing and implementing initiatives intended to educate and empower consumers. A strategy to improve the financial literacy among consumers, that includes measurable goals and benchmarks, must be developed.

I am particularly proud of the work we have done in the bill to better protect, inform, and empower retail investors. My proposal to create an Investor Advocate within the Securities and Exchange Commission is in the legislation. It is necessary to create an office of the Investor Advocate within the SEC to strengthen the institution and ensure that the interests of retail investors are better represented.

The Investor Advocate is tasked with assisting retail investors to resolve significant problems with the SEC or the self-regulatory organizations. The Investor Advocate’s mission includes identifying areas where investors would benefit from changes in Commission or SRO policies and problems that investors have with financial service providers and investment products. The Investor Advocate will recommend policy changes to the Commission and Congress in the interests of investors.

I have highly valued the contributions of the National Taxpayer Advocate, Ms. Nina Olson. Ms. Olson has helped us develop policies that have improved the lives of taxpayers.

A similar office in the SEC will benefit retail investors. The creation of the Office of the Investor Advocate has widespread support from consumer, labor, and industry organizations.

The text of an amendment I had developed, which clarifies that the SEC has the authority to effectively require disclosures prior to the sale of financial products and services, is included in the legislation.

Many working families rely on their mutual fund investments and other financial products to pay for their children’s education, prepare for retirement, and attain other financial goals. We must ensure that working families have the relevant and useful information they need when they are making decisions that determine their future financial condition. I appreciate the efforts of Sen. Michael Bennet on this issue as well.

I worked with Sen. Kohl to develop Title XII of the legislation which is intended to increase access to mainstream financial institutions for the un-banked and the under-banked. About one in four families are unbanked or under-banked. Many are low- and moderate-income families that cannot afford to have their earnings diminished by reliance on high-cost and often predatory financial services.

Under-banked consumers rely on non-traditional forms of credit, including payday lenders, title lenders, or refund anticipation loans for financial needs. The unbanked are unable to save securely for education expenses, a down payment on a first home, or other future financial needs.

Regular checking accounts may be too costly for some consumers unable to maintain minimum balances or unable to afford monthly fees. Poor credit histories may also hinder their ability to open accounts. More must be done to promote product development, outreach, and financial education opportunities at banks and credit unions. Title XII authorizes programs intended to assist low- and moderate-income individuals establish bank or credit union accounts.

Title XII will also encourage the development of small, affordable loans as an alternative to more costly payday loans. Payday loans often have extraordinarily high interest rates. Loan flipping often leads to instances where the fees paid for a payday loan well exceed the principal borrowed. This situation often creates a cycle of debt that is hard to break.

There is a great need for working families to have access to affordable small loans. This legislation would encourage banks and credit unions to develop consumer friendly payday loan alternatives. Consumers who apply for these loans would be provided with financial literacy and educational opportunities.

One example of an innovative payday lending alternative can be found at the Windward Community Federal Credit Union in Kailua, Hawaii. Windward FCU has developed an affordable alternative to payday loans to help the U.S. Marines and the other members that they serve.

This program was developed with an NCUA grant. More working families need access to affordable small loans. We must encourage mainstream financial service providers to develop affordable small loan products.

Finally, Title XII will enable community development financial institutions to establish and maintain small dollar loan programs. I appreciate all of the work done by Senator Kohl and his staff on Title XII.

Working families often send substantial portions of their earnings to family members living abroad. In my home state of Hawaii, many of my constituents remit money to their family members living in the Philippines and other nations.

Consumers can have significant problems with their remittance transactions, such as being overcharged or not having their money reach the intended recipient. Remittances are not currently regulated under federal law and state laws provide inadequate oversight.

The bill 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 process for remittance transactions would be established by the legislation.

We must quickly enact this legislation that will protect, educate, and empower consumers and investors. Thank you.

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