March 31, 2009
Washington, DC — The National Community Reinvestment Coalition (NCRC) – in alliance with the Global Community Reinvestment Coalition (GCRC), including partner organizations and citizen leaders in the UK, Europe, Asia, Latin America and Africa, today issued a call for the G-20 to commit itself to the creation of a financial system that is worth saving, by:
•? Agreeing to put in place a cross-border ‘duty to exercise responsibility in financial services’ for providers within their banking and credit licensing systems. Financial services providers and all related firms in the financial sector (insurers, investment firms, rating agencies, etc.) should be required to follow clear principles of responsibility and to have transparent mechanisms in place to enable citizen oversight, in order to ensure that these principles guide behavior in practice. This affirmative obligation should include a requirement for financial firms to consider financial inclusion and the impact of their practices on all households – including those with low incomes and in communities of color – when designing and offering financial products and services, in a manner consistent with safety and soundness.
•? Ensuring that taxpayer aid to the banking system is turned into real help for people in financial difficulty by requiring lenders to review, reschedule or otherwise modify the debt liabilities of households at affordable rates over the long term.
•? Agreeing to take further action to stop home repossessions and to ensure that lenders offer affordable mortgages to people in negative equity and/or mortgage arrears, wherever possible; and committing to stabilize housing costs in the longer term by increasing the supply of affordable housing, both for rental and for homeownership.
If the G-20 would put in place a regulatory and supervisory system of accountability and affirmative obligation to serve communities (consistent with safety and soundness), this global crisis might have been prevented or at least limited. NCRC and its global partners urge the G-20 to move forward on this agenda, to prevent a global financial crisis from occurring again.
NCRC’s President and CEO, John Taylor, commented:
“The major lesson to be learned from this global financial crisis is that without the rule of law, malfeasant lending practices by the private sector can undermine a nation’s economy. The financial services sector requires a healthy mixture of consumer protections, regulatory oversight including high-end financial instruments (derivatives, hedge funds, etc.), transparency, and clear requirements that lenders must offer fair and non-predatory products and services to all creditworthy borrowers, even low- and middle-income families (with the principle of safety and soundness ever present). These elements must always be le rigueur du jour in order to insure stable and effective financial markets.”
Maryellen Lewis, who chairs NCRC’s Global Fair Banking Initiative (sponsor of the Global Community Reinvestment Coalition [GCRC]), added:
“We are now collaborating with citizen groups and civic leaders on every continent to try to patch the gaping regulatory holes that have caused financial disaster for so many families, small businesses and, now, nations on every continent. With strong leadership by the G-20 to discipline global financial markets and to secure their underlying assets in households around the world (homeowners, stockholders, taxpayers), this growing movement for transparency and accountability of the financial sector will have new tools for true citizen oversight of this critical public good.”
Udo Reifner (Chair of the European Coalition for Responsible Credit [ECRC] and Director of the Institute for Financial Services in Hamburg, Germany) provided this:
“The huge subsidies to the financial sector have brought into clear focus the critical role for prudent regulation of consumer lending. This unanticipated use of taxpayer funds has also amplified public demands that policymakers take bold steps to ensure that banks behave more responsibly in the future. While the implementation of the new EU-Directive on Consumer Credit in all European Union Member States still represents the old views of deregulation and “buyer beware”, a number of parliaments (such as in Portugal, Germany and the UK) are also discussing more aggressive measures to cope with high risk lending practices, credit card credit, secondary mortgages, access to basic bank services, and the irresponsible shift of risks away from the originators of the loans to hedge funds. The G-20 should also carefully consider these crucial measures which alone will allow money markets to stabilize and make investments safe again, while helping to cope with the modern disease of overindebtendess.”
Damon Gibbons, who co-chairs the European Coalition for Responsible Credit (ECRC) and chairs Debt on our Doorstep in the UK, commented:
“Financial services providers have engaged in irresponsible and usurious lending, causing households to become increasingly vulnerable to economic shocks and saddling them with unsustainable levels of debt. We call on the G-20 to signal a decisive break with the short termism, greed, and irresponsibility that have caused the current crisis and to take action to ensure that taxpayer investment in the banking system is now used to create a system that benefits people.”
Also supporting the work of the global coalition, Andy Case – a National Secretary for Unite, the UK’s largest trade union with 2 million members including 178,000 working in the Finance Sector – said:
“The current situation provides an opportunity to re-build a financial system that supports a long-term outlook and is consistent with democratic aims, financial stability and social justice.”
The current global financial crisis had its roots in the mortgage crisis in the United States, where consumer protections are far more limited than in most European nations. In the US, the beneficial oversight of depository banks through the Community Reinvestment Act (CRA) prevented the most irresponsible lending. According to the Federal Reserve Board, in 2006 only 6 percent of the subprime problematic loans were to low- to moderate-income borrowers and covered under CRA. Stated otherwise, almost 95 percent of the reckless and irresponsible loans that formed the epicenter of the foreclosure crisis had nothing to do with CRA lending to low- to moderate-income households. But a huge, unregulated financial sector has grown up in the US since deregulation began in the 1990s, and here the predatory practices were rampant, and then were concealed within Mortgage Backed Securities (given unwarranted high ratings from the big rating agencies), half of which were purchased by non-US investors. When these securities were leveraged through derivatives and hedge funds, a house of cards was built that linked most of the world’s economies into a disaster-waiting-to-happen.
Several countries, particularly in Europe, have stronger consumer protections that may prevent the worst of the predatory practices that have undermined family assets and community economic health in the United States. But the transnational financial market institutions, intimately intertwined and diffusely owned across the globe, are as unregulated or severely under-regulated in every national economy as in the United States.
A list of signatories to this statement follow below:
Organizations Country
ASB Schuldnerberatungen Austria
Arbeiterkammer Wien Austria
Democratic Lawyer’s Assn of Bangladesh/DLAB Bangladesh
Observatoire du Crédit et de l’Endettement Belgium
Asbl GREPA Belgium
Réseau Financement Alternatif Belgium
Crédal Belgium
Instituto de Estudos do Trabalho e Sociedade/IETS Brazil
Consumers’ Defence Organisation Czech Republic
Institut für Finanzdienstleistungen e.V. Germany
Verbraucherzentrale Bundesverband e.V. Germany
Katholischer Verband für Soziale Dienste in Deutschland e.V. Germany
Verbraucherzentrale Hessen e.V. Germany
Verbraucherzentrale Hamburg e.V. Germany
Verbraucherzentrale Bremen e.V. Germany
IHV Insolvenzhilfeverein Germany
European Consumer Debt Network (Dieter Korczak) Germany
IslamicFinance.de Germany
Prof. (em.) Dr. Hans Dieter Seibel, Cologne Society Germany
for the Advancement of Development Research
National Research Institute of Legal Policy Finland
Kuluttajavirasto Konsumentverket Finland
Institut National de la Consommation France
Cresus France
TestePourVous France
MicFin France
Finansol France
SOS Familles Emmaüs France
EKPIZO Consumers’ Association Greece
Personal Finance Counselling Association Croatia
National Association of Consumer Protection Hungary
MicroSave India
Sa Dhan, The Association of Community Development India
Finance Institutions
Rajasthan Shram Sarathi Association India
Combat Poverty Ireland
Money Advice and Budgeting Services Ireland
Free Legal Advice Centres Ltd. Ireland
Altroconsumo Italy
Caritas Italy
CODICI Italy
Consumer Loan Task Force Japan
Kohjimachi Citizen Law Office Japan
Ligue Medico-Sociale Luxembourg
Himalayan Institute of Development Nepal
Union Luxembourgeoise des Consommateurs Luxembourg
Nederlandse Vereniging von Volkskrediet Netherlands
Centro de Arbitragem De Conflitos de Consumo de Lisoboa Portugal
Ass. Portuguesa para a Defesa do Consumidor Portugal
Dr. Rodica Diana Apan, Attorney Romania
Professor Dr. Florin Ciutacu, Univ. Dimitrie Cantemir Romania
& President, Romanian Assn for Study of Private
Comparative Law
Slovene Consumers Association Slovenia
Asociación para la Defensa de los Impositores de Spain
Bancos y Cajas de Ahorres de Espana
Observatoire de la Finance Switzerland
Verein Schuldensanierung Bern Switzerland
Fair Finance Ltd UK
Community Development Finance Association UK
Citizens Advice Scotland UK
Debt on Our Doorstep UK
New Economics Foundation UK
Community Finance Solutions UK
Toynbee Hall UK
Brasilcon Brazil
Institiuto de Defesa do Consumidor Brazil
you & your money South Africa
NCRC [on behalf of its 600+ member organizations] US
The interfaith Network of Spiritual Progressives US/Internatl
New Rules for Global Finance Coalition US
CHF International Associated US
Heinz Riehl, founding member of Finance, Credit US
and International Business & Professor of Finance at NYU
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The National Community Reinvestment Coalition is an association of more than 600 community-based organizations that promote access to basic banking services, including credit and savings, to create and sustain affordable housing, job development, and vibrant communities for America’s working families.
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