A Year of Challenge for Congress

January 7, 2009

Given the recent meltdown in the country’s financial services industry, we can expect regulatory reform to be a priority for Congress and the incoming Obama administration. While some reforms are no doubt needed to curb the more egregious abuses that occurred, it is important that the desire to “fix the problem” does not create adverse, unintended consequences.

For example, millions of consumers are facing increasingly restricted access to credit, as banks, mortgage lenders and credit card issuers reassess their lending policies. Nevertheless, the need for credit remains, even if only to address short-term, temporary shortfalls. Historically, this type of credit, typically offered in the form of payday advance loans, has been regulated at the state level. These types of loans are currently legal in 34 states, and state legislatures have regulated the industry to address the concerns of their particular constituents. That is where regulation should remain.

At the same time, as the House Financial Services Committee and the Senate Banking Committee begin to address the host of related issues in the months to come, it is absolutely critical that they work to ensure continued access to the financial system which is the lifeblood of virtually every business in America. One way to accomplish that goal is to push for passage of the Money Services Business Act. A bill was introduced in the House during the past Congress (H.R. 4099) and passed unanimously. This legislation would address the ongoing problem of bank discontinuance, the blanket termination of MSB bank accounts by traditional financial institutions in response to unclear guidance from regulators. Without such access, MSBs cannot conduct business. Millions of Americans rely upon MSBs to conduct their daily financial business and bank discontinuance threatens their access to the financial system. Similar legislation will be reintroduced this year and it is absolutely critical that Congress pass it and President-elect Obama sign it into law.

As Congress works to address significant challenges in the coming year it is imperative that it maintain, not restrict, access to the financial services that will be at the core of an economic revitalization.