Merkley Applauds Fed for Steering Payment Ban

Calls for Quick Action in Creation of Consumer Protection Agency

Thursday, July 23, 2009

WASHINGTON, DC – Chairman of the Federal Reserve Board, Ben Bernanke, announced today that the Federal Reserve is recommending new rules to benefit consumers, including a ban on yield spread premiums, also known as steering payments.  The new rules also require lenders to provide borrowers with a straightforward explanation of the cost of their loan. 

Upon announcement of the new proposal, Oregon’s Senator Jeff Merkley made the following statement:

“I have advocated for a long time that we protect American consumers by ending secret steering payments.  I’m pleased that today we’re finally seeing action.

“Prospective homebuyers turn to their mortgage broker for guidance in a complex financial decision.  By allowing trusted brokers to take secret payments for steering families into loans they can’t afford, we’ve turned the American dream of homeownership into a nightmare for millions of families. 

 “Today, the Fed made a common-sense recommendation to end these deceptive practices and empower families looking to buy a home.  If the Fed had put these rules to protect homebuyers in place six years ago, we would have avoided a large part of the housing crisis that spurred the current recession.

“When made final, these rules from the Fed will benefit homeowners, but the fact that the Fed is proposing them now – rather than years ago – underscores the need for a consumer financial protection agency whose sole purpose is to protect consumers.  The Fed is closing the barn door not just after the horses have fled, but after the barn has burned down.  A consumer financial protection agency could have ended this corrupt practice before it did so much damage to millions of families.  We need an agency that has the mission and the will to move quickly to address the kinds of deceptive financial practices that wreak havoc on working families.

“It’s time to put consumers first and take a responsible approach to the long-term economic stability of our families and the country.

“I’m proud to see progress today.  I look forward to working with Chairman Bernanke and the Obama Administration to develop a consumer protection agency that heads off the kinds of financial scams, like steering payments, that have damaged our economy and hurt working Americans.”

In April 2009, Merkley introduced the Transparency for Homeowners Act to ban steering payments.