Rep. Waters Introduces Bill to Address Use of Consultants

Rep. Maxine Waters (D-California), who has been an ""outspoken critic"":http://democrats.financialservices.house.gov/press/PRArticle.aspx?NewsID=1526 Independent Foreclosure Review (IFR) process, announced the introduction of legislation addressing the use of independent consultants in banking regulation and enforcement processes.

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Three other representatives--Elijah E. Cummings (D-Maryland), Al Green (D-Texas), and John Conyers, Jr. (D-Michigan)-also joined as original cosponsors.

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The Stop Outsourcing Banking Enforcement and Examination Act would require consent orders from federal banking regulators to be made public when third party consultants are involved.

Another provision in the bill would require consultants to be paid directly by the government instead of by the company subject to the consent order. According to a release from Waters, the legislation is meant to address conflicts of interest in the use of independent consultants that are also paid by the institutions they are investigating.

The bill would also require disclosure of any business relationship between consultants, banking regulators, and financial institutions.

""In the case of the Independent Foreclosure Review, when 'independent' consultants fail to accurately assess error rates for improper foreclosures, it means that regulators may vastly underestimate the damage done to aggrieved borrowers. This conflict of interest favors the companies which pay outside consultants over the consumers who have been wronged,"" Waters said in a release.