Critics Question Insurer Exemption from N.H. Consumer Protection Law

March 25, 2008

The subprime mortgage crisis is prompting some people to take another look at New Hampshire’s consumer protection law.

Six years ago, the Legislature changed the law to exempt the banking, insurance, public utilities and securities industries from the law’s protection against unfair or deceptive trade or practices. That means someone who has been harmed by an unscrupulous mortgage broker, payday lender or insurance agent can’t bring a lawsuit to recover damages.

Critics say New Hampshire has one of the weakest consumer protection laws in the country. But supporters of the law say consumers are better off having state regulators protect their rights rather than having to sue businesses if they’re harmed.

“I could be proven wrong, but in my mind I can’t fathom that the banking commissioner cannot be better at taking care of the consumer than the courts,” said state Rep. John Hunt, R-Rindge, who was chairman of the House Commerce Committee when the exemptions were enacted.

Concord lawyer Martin Gross was a lobbyist for the American Insurance Association when the law was changed. He said it makes sense to exempt insurance companies because there’s another law that allows consumers to sue an insurer if the insurance commissioner has investigated the company for engaging in unfair trade practices. However, Gross said the subprime lending crisis may be reason to reconsider the broad exemption for financial institutions.

“Personally, I think the rascality that’s gone on in the mortgage business just cries out for more regulation,” he said.

Banking Commissioner Peter Hildredth argues that bringing banks under the Consumer Protection Act wouldn’t solve the problems that led to the crisis. The law would only cover state-chartered banks, he said, which could prompt local banks to seek federal charters to avoid the law.

Manchester consumer lawyer Edward O’Brien disagrees. He said state banking laws may not apply to federally chartered banks, but that doesn’t mean those institutions are exempt from state consumer protection laws. He said the number of foreclosures due to subprime lending would be less than half what it is because “I would have brought class-action lawsuits against at least 10 or 15 subprime lenders that were routinely making loans to consumers that did not have a realistic expectation of repayment.”

David Rienzo is an assistant attorney general in the consumer protection bureau, which strongly opposed the 2002 changes. He said the key to the Consumer Protection Act is its ability to “open the courthouse door.”

“It’s designed to give the public the tools that they need to protect their own rights,” he said.

Last year, Rep. Neal Kurk sponsored a bill to exempt from the Consumer Protection Act only “any transaction that is expressly permitted” by the regulators listed in the law. Kurk, R-Weare, noted that the Public Utilities Commission has created a special office of the consumer advocate but no such office exists in banking, insurance or securities regulation.

“So the consumer, from my perspective, is invisible at the table,” he said. The bill was killed by the House.


Information from: New Hampshire Union Leader,

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