Progress Illinois

It's been less than three months since opponents squashed Sen. Dick Durbin's mortgage modification bill -- a common sense proposal to stem the spread of foreclosures. After dumping millions of dollars of campaign contributions into the coffers of Wall Street-friendly lawmakers, the banking lobby probably thought their work on the issue was done for the time being.

But it looks like they were wrong. According to Mike Lillis of the Washington Independent, leaders of the Senate Judiciary Committee have scheduled a hearing for tomorrow morning titled: "The Worsening Foreclosure Crisis: Is It Time to Reconsider Bankruptcy Reform?" The answer to that question seems clear. Anger is simmering in Washington over bureaucratic delays in the Obama administration's "Making Home Affordable" plan, which has secured only 50,000 successful loan adjustments since it was launched in April. Meanwhile, foreclosures continue to stack up. Already this year, the Center for Responsible Lending estimates that 56,872 new foreclosures have been filed in Illinois alone. After his bill died in the Senate this spring, Durbin said he wanted to revisit the issue as soon as possible. The hearing tomorrow will hopefully give us some sense of whether that is going to happen.

In other Congressional news, the House Financial Services Committee was scheduled to begin its mark-up of a bill to create a new Consumer Financial Protection Agency on Thursday as well. But Rep. Barney Frank -- chair of the committee -- is now bumping it back until September, according to The Hill.

After the recess, Republicans that side with the banks on consumer protection will try their hardest to block the bill by offering what Roll Call's Charlene Carter describes as "a barrage of amendments and rhetorical broadsides" intended to discredit the idea. Legislators would be wise to read Congressional Oversight Panel chair Elizabeth Warren's breakdown of the three big myths surrounding the Consumer Financial Product Agency, which we linked to yesterday. Warren does a particularly good job of explaining why the CFPA won't limit consumer choice:

At a recent hearing on the CFPA, Rep. Brad Miller challenged an industry representative to identify one consumer who chose double-cycle billing to be included within the terms and conditions of his or her credit card contract.  It was a great moment.  If the status quo is about choice, then explain why half of those with subprime mortgages chose high-risk, high-cost loans when they qualified for prime mortgages.  If the status quo is about choice, then explain why Citibank declared itself consumer friendly, dropped universal default, then quietly picked it up again the following year because they said consumers couldn’t tell whether they had the term or not.

The truth, of course, is that no consumer “chooses” to accept the tricks and traps buried within the legalese of financial products.  Rather, consumers must choose among various products with one feature in common: dozens of pages of incomprehensible fine print.

The CFPA will not limit consumer choice.  Instead, it will focus on putting consumers in a position to make choices for themselves by streamlining regulations, making disclosures smarter, and making financial products easier to understand and compare.