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Dinallo Plan Puts Consumers First, Fights Financial Fraud
July 29, 2010
Experienced Watchdog to Make Sure Banks Follow the Rules, Stop Financial Crimes
Eric Dinallo, Democratic candidate for Attorney General, released his Consumer and Financial Protection Agenda to protect consumers and fight financial fraud. The comprehensive approach boldly takes on the full range of consumer protection issues – from policing Wall Street to stopping price-fixing. Dinallo will create a new Consumer Financial Products Unit to cover the types of unfair financial practices that Washington’s reforms do not.
“New York’s Attorney General has been the greatest consumer protector, but our next Attorney General will need to expand that role. We need to make sure the big banks follow the new federal regulations, and also protect consumers from the types of abuse the Dodd-Frank Act does not cover,” Dinallo said. “As the only candidate who worked as an Assistant Attorney General, and who tackled these financial problems long before it was popular to do so – I know how to stand up to Wall Street and stop the other types of financial abuse that has fallen through regulatory gaps.”
“My Consumer and Financial Protection Agenda takes the broadest approach to stop those who go after New Yorkers’ wallets. I have fought to protect New Yorkers throughout my career and will bring my experience as a prosecutor, regulator and watchdog to do so as Attorney General,” Dinallo added.
Dinallo has outlined how he will address the issues New Yorkers face from public corruption to consumer protection, which is included below. Eric’s Agendas are available at www.ericdinallo.com.
Consumer and Financial Protection Agenda
To fully protect consumers, the next Attorney General must address the fraud and unfair financial practices that New Yorkers fall victim to – from major conflicts of interest on Wall Street to boiler room scams. The Attorney General’s office is equipped with the tools to stop those who prey on and exploit others. Dinallo will use the power of the Attorney General’s office to investigate, and prosecute unfair financial practices against New Yorkers.
1. Filling in the Regulatory and Enforcement Gaps
The federal Wall Street Accountability and Consumer Protection Act leaves a number of gaps in regulation and enforcement, like regulating auto dealers. The Attorney General can and must fill those gaps on an ongoing basis.
Create a New Consumer Financial Products Unit
Dinallo will create a Consumer Financial Products Unit within the Investor Protection Bureau, which he led as an Assistant Attorney General. The New York Attorney General’s office has been an outstanding consumer protection agent. This new unit will continue expand on that work and be used to aggressively enforce the new federal regulations.
It will also protect consumers in the areas not covered in the federal financial reforms, for instance auto dealers, small banks, or retailers that issue credit or use layaway. Bad actors will try to exploit loopholes in the federal reform legislation, and Dinallo will aggressively investigate and prosecute them. Using the Martin Act, Executive Law 63(12), General Business Law §349, and other relevant state laws, the Consumer Financial Products Unit will close these regulatory gaps, and protect consumers from unfair and deceptive business practices. It will also focus on an array of sophisticated and complex financial products that consumers now have access and exposure to. The Unit will address:
• derivatives, including credit default swaps;
• predatory lending;
• online financial scams;
• false advertising and unsuitability in the sale of insurance products like annuities;
• unfair life insurance policy settlements;
• auto dealer scams;
• debt consolidation/foreclosure rescue scams;
• real estate finance fraud;
• reverse mortgages;
• unscrupulous debt collection practices; and
• retail credit scams.
Inadequate capital behind obligations and a lack of transparency were main causes of the financial crisis, and we cannot allow similar risky behavior to take down our economy again. As Attorney General, Dinallo will bring cases against financial firms that engage in sham transactions, accounting fraud and other deceptive activities to skirt the federal reform requirements. He will also prosecute firms that misrepresent or conceal their true financial condition.
As Insurance Superintendent, Dinallo developed the first set of pension regulations in decades to safeguard assets in the fund by increasing transparency, requiring conflicts of interest disclosure, and setting strong corporate governance standards.
Before the financial crisis, banks packaged and sold “safe” investments to municipalities all over the country. Many of those investments turned out to be exotic financial instruments. For example, municipalities and non-profits have paid billions of dollars to unwind swap agreements and other financial products that were supposed to save them money, but ended up doing the opposite.
Dinallo will use the Martin Act to investigate whether municipalities were fraudulently misled about the level of risk of these complex financial instruments. If wrongdoing is found, Dinallo will aggressively prosecute financial services firms in order to recoup money lost by municipalities and pension funds.
2. Protecting New Yorkers’ Pocketbooks
Scams that take advantage of New Yorkers don’t just come from Wall Street – they come from companies big and small that put profits ahead of people. Dinallo will put the Attorney General’s office to work to protect New York’s consumers.
Ensure Fairness and Transparency in Banking and Credit
• ATM and Bank Fees: As chief of the Investor Protection Bureau, Dinallo investigated banks that steered consumers into high cost bank accounts instead of basic accounts that state law mandates banks to offer. He reached a settlement that forced the banks to disclose and advertise the full range of legally mandated services they provide. As Attorney General, Dinallo will expand on this work to ensure that banks are transparent about their policies, fees, and obligations.
• Faulty Products: Protecting New Yorkers on a day-to-day basis is a primary function of the office, and as Attorney General, Dinallo will ensure that distributing or selling dangerous products is swiftly and aggressively stopped, from using our state’s lemon laws to take on the auto manufacturers, to using Executive Law 63(12) and the General Business Law to go after poisoned dog food, the office will continue to be a national leader in ensuring safety and responsibility.
• Financial Scams: Consumers are particularly vulnerable to financial scams during recessions as they see their retirement savings and bank accounts dwindle. Dinallo will prosecute fraudsters who prey on consumers looking to recoup the savings they lost in the financial crisis.
The Attorney General’s office will spearhead a program to increase New Yorkers’ financial literacy, particularly about the new federal reform bill, provide information on how to spot a scam, and ensure that New Yorkers throughout the state have access to the Attorney General’s office. The office will partner with other agencies and non-profits on this important initiative, and direct funds from financial wrongdoing settlements to financial literacy efforts.
3. Combating Collusion and Price-Fixing
The Antitrust Bureau is a key player in the Attorney General’s power to protect consumers. While the Bush-era antitrust authorities in Washington were asleep at the switch, the Antitrust Bureau helped lead multistate cases of national importance. Now that Washington has stepped up its antitrust enforcement, Dinallo will focus the bureau’s work on local cases that affect New Yorkers specifically, while continuing to step in on national cases where necessary.
Buying Power in Agricultural Markets
There is increasing evidence that near-monopoly milk processors and distributors are using their substantial buying power to drive down prices paid to New York’s dairy farmers for milk. This leads to pressure on farmers to cut corners and shifts profits away from farmers and up the production chain. Dinallo will investigate the use of monopsony power by milk distributors to determine whether they are undercutting fair prices for our dairy farmers, and bring an antitrust action if I find any wrongdoing.
Upstate Health Insurers
Many upstate markets have little or no competition among health insurers. Until prior approval legislation was signed this summer, the New York State Insurance Department was not allowed to control the rates charged by insurers, leading to huge increases in rates and profit. Dinallo will investigate health insurer monopolies using the Donnelly Act as well as other applicable antitrust laws to ensure that the upstate insurers are not abusing their monopoly status to harm consumers.
Cell Phone Bills and Contracts
Dinallo will investigate the possibility of anti-competitive practices by cell phone carriers such as lock-step text message price hikes. Dinallo will also continue the work of our last two Attorneys General to ensure that cell phone companies disclose and adequately inform consumers of the fees associated with their contracts.
Oil & Gas Pricing
Dinallo has traveled to each of New York’s 62 counties and heard complaints of unreasonably high gas prices, including allegations of price fixing in oil and gas markets. As Attorney General, Dinallo will direct the assistant attorneys general to investigate allegations of price fixing in energy markets using the Donnelly Act.
