Why is the proposed Consumer Finance Protection Agency placing
national banks in line to receive millions of new customers at the
expense of community banks and other regulated lenders currently
servicing minorities, immigrants and non-banked Americans?

The proposed Consumer Finance Protection Agency is being considered as one of the
most important elements in the Obama administration’s finance reform policy. It would
impose strict federal regulations on small and non-bank lenders designed to protect
consumers against predatory lending practices and usurious interest rates, and would
closely monitor banking regulators. Despite reports earlier this month that lawmakers
would adjourn further discussion on the agency, House Bill 3126 - Consumer Financial
Protection Agency Act - is currently under heavy debate in Congress.  Legislators are calling
new attention to the need for a government entity that would tightly regulate non-bank
lenders on a federal level, citing payday loans and sub-prime mortgages as one of the
many causes of the financial downfall.

As members of Congress tout the virtues of the CFPA and the protections it would grant consumers, serious questions are being raised as to the long term effects it will have on non-bank
lenders and the millions of un-banked and struggling families that rely on their services to
make ends meet. The pawn industry, for example, an already heavily regulated business
at the local, state, and federal levels, is concerned that the addition of new regulations
would seriously jeopardize the services that pawnbrokers currently provide to their local
communities. Furthermore, Senate Bill 500 which is also circulating in Congress proposes a
36% APR rate cap on all loans that might put the industry out of business entirely.
Details of the issues at hand can be found at www.PawnShopsToday.com.

David Crume, President of the National Pawnbrokers Association, is concerned that
lawmakers mistakenly equate the pawn industry with payday loan companies, and that
these laws will severely limit the services pawnbrokers can offer. “Pawn stores offer
collateral loans that are small dollar, short term, and pose no negative credit effects if
unpaid. Pawn and Payday,” he says, “are two very different products. Payday loans
require repayment and could affect a consumer's credit if left unpaid. The average pawn
transaction is $80, and is a non-recourse loan. ” Crume says that banks simply don’t offer
these types of loans, making the pawn industry such a vital part of the financial system.
According to Crume, the new legislation will reduce pawn stores to buy/sell
establishments. With diminishing credit accounts and banks unwilling to extend loans in
small dollar amounts, many consumers are flocking to these non-bank lenders in order to
close the financial lapses that occur when bills are due but paychecks haven’t arrived.

America’s small banking sector has also expressed uneasiness about the CFPA. In a
letter from Senator Mary L. Landrieu of Louisiana on September 25, 2009 to Senator
Chris Dodd, Chairman of the Senate Committee on Banking, Housing, and Urban Affairs,
Landrieu reports significant concerns from community banks in her state. “Although
community banks did not offer the types of products that caused the financial crisis,” she
writes, “many are concerned the administration’s proposal could result in additional
regulatory burdens and costs to their institutions.”

Who, then, will really benefit from the CFPA? In February of this year, the FDIC
reported as many as 28 million un-banked and 44 million under-banked Americans,
citing lack of liquidity to carry account balances and bank fees, bad prior experiences,
lack of sufficient identification, and unfamiliarity or distrust of banks as the most
common reasons why people are un-banked. According to Melissa Koide, Deputy
Director of the Asset Building Program for the New America Foundation, many of the
un-banked consist of lower income families that operate at the margins and can’t afford
to wait several days for checks to clear. Another large portion of the under-banked
community is made up of immigrants who use remittance services to send money to their
families in their home countries. Her statistics show that the under-banked spend 25
billion dollars a year, with 6 billion spent on credit, and 4.6 billion on payment and
remittance services. The hefty regulations and new fees the CFPA seeks to impose, could
create a major fall-out in the non-banking sector, leaving millions of under-banked
Americans with few alternatives.

The wide sweeping nature of the CFPA would target the institutions that did not
introduce the toxic components leading to the financial meltdown. Smaller financial
institutions and non-banks, such as community banks and pawn stores would be
overburdened with new regulations and forced to pay for the very agency that could run
them out of business. In the end, where will the millions of un- and under-banked be
forced to turn? That’s right, to the national banks, the same ones that offered sub-prime
mortgages to millions of Americans, triggering the biggest financial downturn in decades.
With the resulting weakened competition, major banks stand to gain billions in new
accounts at the expense of the American consumer.

To learn more, please visit:

www.PawnShopsToday.com

Follow Pawn Shops Today on Facebook and Twitter