By Jim Kuhnhenn, Associated Press Writer
WASHINGTON (AP) — Taking aim at deceptive lending, the Senate on Wednesday voted to ban mortgage brokers and loan officers from getting greater pay for offering higher interest rates on loans, and to require that borrowers prove they can repay their loans.
The Senate, however, rejected a measure that would have required homebuyers to make a minimum downpayment of 5% on their loans. The votes were part of the Senate's deliberations on a broad overhaul of financial regulations designed to avoid a repeat of the crisis that struck Wall Street in 2008.
President Barack Obama weighed in on the Senate debate Wednesday, criticizing a proposed amendment that would exclude auto dealerships that offer car loans from oversight from a consumer financial protection bureau that the broader legislation would create. Auto dealers — influential figures in their communities — have been aggressively lobbying for an exemption from the law, and the amendment, offered by Sen. Sam Brownback R-Kan., could win bipartisan backing.
"This amendment would carve out a special exemption for these lenders that would allow them to inflate rates, insert hidden fees into the fine print of paperwork, and include expensive add-ons that catch purchasers by surprise," Obama said in a statement. "This amendment guts provisions that empower consumers with clear information that allows them to make the financial decisions that work best for them and simply encourages misleading sales tactics that hurt American consumers."
The administration has fiercely tried to protect the consumer provisions of the bill. It has answered the political power of the auto dealers with an appeal on behalf of the military, arguing that soldiers and their families have been particularly targeted by deceptive dealers.
The Senate unanimously approved an amendment Wednesday that clarified any regulations or enforcement actions by the proposed consumer protection bureau would not affect merchants and retailers that do not engage in a financial services. Critics, including the U.S. Chamber of Commerce, had argued that the bill could affect small business owners such as orthodontists, who allow patients to pay over time.
Separately, the Senate overwhelmingly voted to let the Federal Reserve retain its supervision of smaller banks. The underlying regulation bill would have given the central bank oversight only over the largest financial institutions.