By Renato Rocha, Policy Analyst, Economic Policy Project, NCLR
Photo: Pictures of Money
Debt collection in the Latino community is a critical consumer protection issue for one of the nation’s largest and fastest-growing communities.
Latino families need access to affordable credit but have been historically excluded or discriminated from accessing safe financial products. The FDIC’s 2015 Survey of Unbanked and Underbanked households indicated that a result of this persistent economic injustice is that Latinos and other consumers who have been outside the financial mainstream are vulnerable to financial shocks, such as health-related expenses or job loss. Having been sidelined from affordable products, Latinos have little choice but to turn to more expensive credit to pay for their expenses. For example, 39 percent of Hispanic households used an alternative financial product (such as a payday loan) in 2015, compared to just 17 percent of White households.
By Renato Rocha, Policy Analyst, Wealth-Building Initiative
Photo: Sean MacEntee
Having proposed a rule last month to protect consumers from the payday lending debt trap, the Consumer Financial Protection Bureau (CFPB) has its next target on the debt collection industry. With the passage of the Federal Debt Collection Practices Act (FDCPA) nearly 40 years ago, Congress set out to eliminate abusive debt collection practices. It held that unfair practices lead to personal bankruptcies, marital instability, job loss, and invasion of privacy. Not until the enactment of the Dodd-Frank Act in 2010, however, was a federal agency authorized to issue comprehensive regulations to implement the FDCPA. In an effort to protect and improve the financial well-being of consumers, the CFPB today outlined new debt collection rules.
Since the passage of the FDCPA, the debt collection industry has experienced dramatic growth. Currently, debt collection is a multibillion-dollar industry made up of a network of first- and third-party collectors, debt buyers, collection law firms, and millions of affected consumers. Approximately 70 million people (one in three consumers) has a debt in collection. Thousands of collection firms exist, generating about $14 billion in revenue.