Laura Rowley Money & Happiness

On Sunday, my husband and I had a heated discussion. This might be expected in a family with dueling allegiances to the Mets and the Cubs, but the fight was about H.R. 3997, the Emergency Stabilization Act of 2008. (It ended with me shouting that I'd lost my faith in government's ability to lead, and him suggesting we not discuss such things in front of the children.)

Battle Royale

Ahead of Monday's vote in the House, he was in favor of the Wall Street bailout; I thought it stunk. It didn't put clear-cut, legitimate limitations on compensation to the reckless marauders who helped create the mess (some of whom belong in jail). It gave Treasury Secretary Henry Paulson too large and too blank a check to buy anything he saw fit from his former colleagues on Wall Street, without sufficient oversight or clear accountability. And it gave the American taxpayer no stake in the companies they would be helping.

Suggesting taxpayers don't need that stake because they'll make money on these assets "someday" seems dubious. In the early 1990s, the Resolution Trust Corporation had real brick-and-mortar assets to sell, and still managed to blow through $150 billion in taxpayer money.

Moreover, it did nothing to work out the terms of millions of mortgages headed for foreclosure. I despise bailing out irresponsible people as much as the next guy. But I also don't think it helps responsible homeowners when their community is overtaken by abandoned shacks. And it doesn't seem unreasonable to suggest that if you're going to do a bailout, it should address the underlying housing problem, because bad mortgages will continue to put pressure on banks.

On "Meet the Press" last Sunday, Paulson told Tom Brokaw, "What we need to do right now is stabilize the markets for the benefit of the American public. Then, when we get this stabilized, there's a lot we can talk about in terms of reform."

What Needs to Change

Now that we have a bill, I'd like Paulson and Congress to act on reforms that not only regulate the wild west of credit default swaps and other Wall Street "innovations," but address the ongoing assault of American consumers by the nation's financial services companies. A few suggestions:

• Make the Credit Cardholders' Bill of Rights law

The bill, sponsored by Reps. Carolyn Maloney (D-N.Y.) and Financial Services Chairman Barney Frank (D-Mass.), passed the House on Sept. 23. No senator has stepped up to the plate to sponsor a companion bill. Among other measures, the bill protects cardholders against arbitrary interest rate increases; prevents cardholders who pay on time from being unfairly penalized; protects cardholders from due-date gimmicks; and requires card companies to fairly credit and allocate payments. It doesn't establish rate caps or price controls. (To email your senator and suggest he or she sponsor a companion bill, click here.)

With the acquisition of Wachovia and Washington Mutual by Citigroup and JP Morgan Chase, respectively, analysts expect banks to become increasingly polarized between the massive global institutions and the small-town thrifts and credit unions. Citigroup, Bank of America, and JP Morgan Chase now account for 30 percent of the nation's deposits, according to The New York Times.

"The things we would be watching closely is whether the consolidation in banking industry has a serious impact on whatever competition there is in credit card market," says Jean Ann Fox, director of financial services for Consumer Federation America. "Wachovia didn't have big credit card presence, but the purchase by Chase of Washington Mutual takes a credit card issuer off the table."

• Pass the Consumer Overdraft Protection Fair Practices Act to protect consumers from abusive overdraft policies

This common-sense regulation would require written consent from the consumer before enrollment in an overdraft loan program, and make financial institutions warn the customer when an ATM withdrawal will trigger a fee -- and allow the customer to cancel the transaction at the time. It would also prohibit financial institutions from manipulating the order of check clearing or delaying the posting of deposits to increase customers' overdraft loan fees. And it would amend the Truth in Lending Act to clarify that overdraft fees are finance charges, so that annual interest rates are reported. This would allow consumers to compare overdraft loans with other credit options -- such as lines of credit, which typically offer annual interest rates of less than 20 percent.

• Adopt the Illegal Garnishment Prevention Act

Between September 2006 and September 2007, banks illegally garnished $170 million in Social Security, disability, and other government payments from account holders on behalf of creditors -- and suffered no repercussions for doing so. A web of conflicting regulations makes it unclear what banks are supposed to do when they receive a state court judgment against a customer who has exempt funds mingled with other money. Banking regulators have met on the issue but done nothing to clarify the issue for banks or to protect consumers.

Part of the problem is that most Social Security and other exempt benefits are now direct-deposited, making it easier to for consumers to lose control of their funds. The Illegal Garnishment Prevention Act, sponsored by Sen. Herb Kohl (D-Wis.), would

prohibit the use of funds to promote the direct deposit of Social Security benefits until adequate safeguards are established to prevent their attachment and garnishment.

• Pass the Arbitration Fairness Act of 2007

Binding mandatory arbitration agreements are now rife in the fine print of nearly every product and service consumers purchase. Studies have found that consumers almost always lose in the arbitration process, which is secretive, complex, expensive, and riddled with conflicts of interest.

Sponsored in the Senate by Sen. Russ Feingold (D-Wis.) and in the House by Rep. Hank Johnson (D-Ga.), the Arbitration Fairness Act doesn't prohibit arbitration. But it requires that arbitration be freely chosen by consumers after a dispute arises -- rather than forcing people to agree to arbitration in advance through a contractual provision.

• Adopt national legislation to ban payday lenders

Arizona is ground zero for a fight between consumer advocates and payday lenders, who have spent $9 million to push a ballot measure called Proposition 200. The ballot measure would cancel the 2010 expiration of an exemption for payday lenders from the 36 percent cap that covers other lenders, and reduce the allowable interest rate on payday loans to 391 percent.

The report by the Center for Responsible Lending has found that 700 payday lenders charge up to 459 percent annual interest on loans to Arizona consumers. A typical borrower in the state pays an estimated $516 in fees for a $325 payday loan and still owes the $325 in principal, the Center for Responsible Lending report found.

"Proposition 200 is not real reform," Arizona Attorney General Terry Goddard says of the measure. "It is a special interest ploy to indefinitely extend payday lenders' ability to charge up to 400 percent interest to our most vulnerable consumers."

Consumer (and Anti-Consumer) Advocacy

Fox says that after 40 years of working in consumer advocacy groups, she's hoping the bailout will be accompanied by serious reform for the consumer. "Look at the proliferation of payday lenders -- who would have thought we would have allowed that industry to reemerge after squashing it in the middle of the last century?" she says. "Who would have thought the IRS would allow a [tax preparer] to sell or use your tax information so you're enticed into expensive loans that get you the money just a few weeks earlier than if you had used direct deposit?

"Consumer advocacy has resulted in better consumer protections in product safety and other areas," Fox adds, "but the financial services market continues to be truly anti-consumer."