Exempting financial institutions from a Missouri law governing advertising, merchandising and related lawsuits would leave individuals little recourse if they are mistreated, a state consumer protection official told lawmakers Monday.
The bill would exempt banks, credit unions and other lenders from civil lawsuits or action by the attorney general under the Missouri Merchandising Practices Act. The financial institutions say the exemption is needed to address a recent increase in lawsuits against them.
But Joe Bindbeutel, director of the attorney general's consumer protection division, told a House committee that the change would mean banks would have little reason to work with his office to resolve consumer complaints. That would mean consumers would have little recourse if their home was unlawfully foreclosed on or car improperly repossessed, he said.
"Our goal is to see individual consumers get restitution," he said. "Most of the people that complain to us do not have access to other restitutions."
The law prohibits fraud, deceptive advertising and omissions of fact in selling any merchandise and lays out a civil course of action for individuals when they are financially harmed. It also authorizes the state attorney general to take action against financial institutions if a state regulator refers a complaint to the office.
The bill, sponsored by Rep. Tony Dugger, R-Hartville, creates a specific exemption for banks, credit unions and other financial institutions from both private civil and class actions and legal enforcement by the attorney general.
Missouri Credit Union Association lobbyist David Kent said that without a change, there could be a chilling effect on loans in Missouri.
Kent also said consumers have other legal protections, including federal laws. He said minor errors in forms or notices of a car being repossessed following a failure to keep up with payments could result in attorney's fees and punitive damages adding up to "egregious" lawsuit awards.
"There are remedies already available for these types of violations," Kent said. "It's so broad in the way it's interpreted. We're not sure where it's going to stop, and that's what scares us to death."
But Bindbeutel said regulators have little authority or resources to intervene in individual disputes. He noted that his office often resolved disputes without any lawsuit being filed and enjoyed a good relationship with banks and other institutions.
However, without the authority to enforce the state law, he said it was unlikely lenders would be as willing to work out solutions for consumers.
Amy McLard, who also represents the Missouri Credit Union Association, said the group wants to address the concerns from the attorney general's office about their enforcement ability.
House Banking Committee Chair Rep. Sandy Crawford, R-Buffalo, asked Bindbeutel whether consumers would be hurt if the law was not changed, suggesting that lenders would simply pass on any increased costs to consumers.
Bindbeutel said he thinks it would be tough pass to on the costs because the financial industry is extremely competitive.
Crawford said she wanted to address questions from committee members before acting on the bill and could not say when she would call for a vote on it.