Viewpoint

Here, a monthly perspective from Consumers Union on the latest challenges—and possible solutions—facing U.S. consumers today. See archived installments of Viewpoint.

Your bank, now better

When it comes to banking, states have had better ideas about consumer protection than the federal government has had. Take the recent requirement that banks disclose how long it will take you to pay off your credit card if you make only the minimum payments. California proposed a similar idea a decade ago. Anti-predatory-lending laws? Many states sought them in the late 1990s.

The problem has been that while states oversee some banks, many others are nationally chartered and have been exempt from state consumer protection laws and allowed to escape state law enforcement.

But not for much longer. Beginning this summer, national banks must adhere to most consumer protections that states impose on banks. States will have the power to enforce most existing banking laws to protect their residents. And they can enact new consumer protections to keep pace with evolving bank products.

The changes will directly affect your wallet. The 12 largest credit card issuers hold almost 90 percent of all credit-card debt; 9 of those are national banks. National banks also hold 56 percent of insured bank deposits in the U.S. And the nine largest national bank mortgage servicers handled 40 percent of all U.S. home mortgages from late 2007 to early 2008, just before the housing bubble burst.

It starts with the states

An obscure federal banking rule imposed seven years ago led to the previous conflicts over bank oversight.

In California, a 2001 law requiring disclosures about minimum credit-card payments, among other things, was blocked in court by national banks and their regulator. States also passed anti-predatory-lending laws until, in 2004, the Office of the Comptroller of the Currency stopped them from applying mortgage reforms to nationally chartered banks.

States have led in other ways. The box on credit-card solicitations that states the interest rate and annual fee was required by a 1986 California law; Congress followed two years later. Seven states mandated free annual credit reports before Congress did so in 2003. California in 2000 required home lenders who use credit scores to give that score to the consumer; Congress followed three years later.

Consumers Union supports strong financial reform laws; consumers deserve the strongest protections, whichever bank holds their money or makes the loan. Read more at www.DefendYourDollars.org/money_topics.html.