Bankers’ Proposal to Change State Laws Draws Fire

Consumers Union on Wednesday blasted a proposal by the California Bankers Assn. that calls for the first major overhaul of state banking laws in more than 30 years.

At a press conference in Sacramento, Consumers Union, the nonprofit publisher of Consumer Reports magazine, said the proposal would significantly weaken ethics laws applying to banks and the State Department of Banking.

The California Bankers Assn. has worked for three years on a proposal to repeal and replace sections 99 through 3904--which comprise the state’s banking law--of the California Financial Code. However, the trade group has not found a legislative sponsor to introduce such a bill in the Legislature.

“The California Bankers Assn. rewriting the California Banking Law is like having the fox design the security system for the chicken coop,” said Harry Snyder, director of the West Coast regional office of Consumers Union.

“The bankers have proposed 468 new sections to the Financial Code, including wholesale changes on important topics ranging from the regulatory procedure to consumers rights. The law would decrease the power and effectiveness of the bank’s regulator, the California Department of Banking.”

However, CBA President Daniel D. Herde said in a statement: “Any merit there may be of the Consumers Union comments have been obscured by demagoguery and gamesmanship. In general, their accusations show little understanding of the law.”

The California Department of Banking has established committees to study the proposal and submit comments by spring.