You are hereHome >
In the news
Washington - Rep. Gwen Moore, who says her own experience with predatory lending drew her to politics, is raising the ire of consumer advocates for trying to stop a proposed consumer protection agency from regulating credit insurance.
Sold in connection with major purchases such as homes, cars and furniture, credit insurance is designed to pay off loans on big-ticket items when a borrower dies, becomes disabled or loses a job. But buyers often don't understand what they are buying and pay too much for the benefits they could receive, consumer advocates say. In some cases, consumers end up paying several thousand dollars in premiums to insure loans that are worth only a few times as much, advocates say.
"Consumers have really been taken for a ride on these products," said Bruce Speight, a public advocate for the consumer group WISPIRG. "Clearly there's a need for tighter oversight in light of the facts."
Speight and others say they are particularly disappointed that Moore, who has developed a reputation as a consumer advocate, would take a stand that would benefit credit insurers at the expense of consumers.
On Wednesday, the House Financial Services Committee approved the Milwaukee Democrat's amendment to exempt credit insurance - as well as mortgage and title insurance - from regulation under a new consumer agency. Moore's office says she is doing nothing that would hurt consumers and that she simply is advocating for smart government policy that would prevent dual oversight of an industry that is already well regulated by the states.
"The mission of the new Consumer Financial Protection Agency is not to become involved in the ongoing regulation of the insurance industry," Moore spokeswoman Marni Goldberg said in an e-mail.
New agency debated
The fight over credit insurance regulation comes amid a larger debate about whether to create a new federal agency to oversee the financial services sector after the worst financial meltdown in decades. The new regulatory body is a priority for President Barack Obama, who says he envisions an agency that could "stand up not for big banks and financial firms but for hardworking Americans."
But Obama is drawing fierce opposition from the financial services industry, which has spent at least $225 million on lobbying against the measure so far this year, records show. The industry also has given roughly $32 million in campaign contributions to members of Congress this election cycle.
Moore counts banks and insurers among her top campaign contributors. They have given her nearly $200,000 in donations during her congressional career, according to the Center for Responsive Politics.
The financial services committee is expected to vote Thursday on the larger proposal to create the new agency, which could ban unfair, deceptive or abusive practices such as home mortgages with escalating interest rates. The agency could also enact new rules on overdraft loans, credit cards and payday loans.
Under her amendment, Moore said, the new agency still could stop deceptive practices by lenders offering credit insurance to customers. She noted that her position doesn't mean she thinks the insurance industry should not have to abide by strong regulations.
"It needs to be strongly regulated by state regulators," she said, adding that she has fought against bad actors in the insurance industry in the past.
Moore was actively lobbied on this issue by both consumer advocates and industry groups, including the Madison-based CUNA Mutual Group, the largest writer of credit life and credit disability insurance in the country. Officials with Milwaukee-based MGIC Investment Corp., a leading writer of mortgage insurance, also consulted with Moore's office about the proposed agency.
Industry officials applaud Moore's amendment, noting that no other types of insurance products faced regulation under the House bill. They say her provision brings "clarity" to the industry and prevents litigation that could have resulted from the confusion of having both the states and the federal government overseeing the industry.
"State insurance regulators are very active in this area," said Chris Roe, a lobbyist for CUNA Mutual Group. "It's not as if this area is unregulated."
Your donation supports WISPIRG's work to stand up for consumers on the issues that matter, especially when powerful interests are blocking progress.