Coalition of consumer groups applauds measure as a win for consumer privacy
Upon today's House Financial Services Committee vote passing H.R. 5912 - legislation that would close a loophole in federal banking policy - today, a coalition of consumer groups applauded the move and urged the full House of Representatives to support it.
In a statement, the groups noted that bill would ensure the historic separation between banking and commerce and protect consumers from Big Tech acquisitions of so-called "industrial loan companies" - banking entities that are exempt from certain federal oversight. The groups said the current loophole puts consumer privacy and financial information at risk.
"With today’s vote, the Committee is one step closer to strengthening the financial system by closing the ILC loophole, and we call on Congress to take up this legislation without delay. The current version of the legislation helps preserve the longstanding separation between banking and commerce and restricts Big Tech companies from circumventing existing rules by using a loophole to enter the banking system. This effort reflects the extraordinary bipartisan work by Representatives Jesús “Chuy” García and Lance Gooden to collaborate with stakeholders to reach a solution, and it serves as an acknowledgment that there is no justifiable reason for two similar institutions offering indistinguishable products or services to be treated differently under the law."
Americans for Financial Reform, Bank Policy Institute, Center for Responsible Lending, Consumer Federation of America, Credit Union National Association, Independent Community Bankers of America, Mid-Size Bank Coalition of America, National Association of Federally-Insured Credit Unions, National Community Reinvestment Coalition, National Consumer Law Center and U.S. PIRG were among the groups urging full passage of the measure.
In a previous letter to the House Financial Services Committee, the coalition noted:
"Industrial Loan Companies (ILCs) operate under a special exemption in federal law that permits any type of organization – including a large technology company or commercial firm – to control a full-service FDIC-insured bank without being subject to the same oversight and prudential standards or limitations on the mixing of banking and commerce that Congress has established for the U.S. financial system. Simply put, this regulatory loophole creates safety and soundness risks for the institution, risks to the financial system and additional risks for consumers and taxpayers."