The Financial Choice Act of 2017 Is the Wrong Choice for American Families

By Renato Rocha, Policy Analyst, Wealth-Building Project, NCLR

The reckless behavior of financial institutions including banks, credit card companies, and mortgage lenders caused the 2008 financial crisis that cost Americans millions of jobs, billions in taxpayer-funded bailouts, and trillions of lost retirement savings. A lack of consumer protections and oversight of the financial marketplace allowed unscrupulous lenders to target communities of color with unfair and abusive financial products. The Latino community was disproportionately impacted by the economic crisis and is still struggling to recover.

The devastating and widespread effects of the crisis led to the creation of the Consumer Financial Protection Bureau (CFPB), which we view to be the crown jewel of Wall Street reform. In less than six years, the CFPB has already curbed several deceptive practices in the financial marketplace: bringing transparency to the remittance industry, prohibiting credit companies from adding on products that consumers never agreed to, and requiring mortgage lenders to ensure that applicants can afford the home loans they’re seeking. The CFPB is also working on putting protections in place that would rein in predatory payday loans and debt collection practices. Each one of these actions have helped put all Americans on a path to greater financial security.

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D.C. Circuit Court Attempts to Thwart Consumer Protections

 By Renato R. Rocha, Policy Analyst, Economic Policy Project, NCLR

CFPB_LogoLast week, the U.S. Court of Appeals for the DC circuit decided against the Consumer Financial Protection Bureau (CFPB), making it easier to remove the director, who serves as head of the Bureau. If the decision stands, it will undermine what the CFPB was created to do in the aftermath of the Great Recession—protect consumers—since the director could be removed by the president without cause.

A challenge to the director’s authority is a challenge to CFPB itself. Since the CFPB opened its doors five years ago, it has become clear that the Bureau is exactly what consumers needed, and consumers overwhelming support its work. The CFPB now has authority to regulate a range of industries that previously lacked transparency, including remittance transfers, credit cards, student loan servicing, and payday loans. In order for the Bureau to continue its essential work on behalf of families, the CFPB needs to remain autonomous.

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American Voters Favor a Well-Regulated Payday Lending Industry

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The American public has a very low opinion of payday lenders, says a new poll out from the NCLR Action Fund, Americans for Financial Reform, Center for Responsible Lending, and the NAACP. The poll, which comes on the heels of a proposed Consumer Financial Protection Bureau rule to reign in predatory lending, shows Americans see little value in the services payday lenders provide.

The poll, conducted from May 26 to June 1, 2016, surveyed 1,400 registered voters and found that payday lenders represent some of the least popular institutions around. Of those surveyed, only 3% had a favorable opinion compared to a 51% unfavorable rating. This makes them less liked than used car salesmen.

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The CFPB Empowers Homebuyers

By Nancy Wilberg Ricks, Senior Policy and Communications Strategist, Wealth-Building Policy Project, NCLR

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Yesterday, the Consumer Financial Protection Bureau (CFPB) released new online tools to help consumers be better informed when purchasing a home. Whether you dream of buying a home years down the line or are in the midst of closing now, these tools can give you helpful information specific to your needs.

Richard Cordray, Director of the CFPB, discussed the new tool, housing trends, and market improvements at The Brookings Institute. In the live webcast (also below), he emphasized the need to change the market culture by empowering homebuyers with better information when purchasing their house—the largest asset that many will ever acquire. “When people take out a loan to buy a home, they deserve to have confidence that they are not being set up to fail,” said Cordray.

Full speech below:

These essential tools also come at the one-year anniversary of the CFPB’s mortgage servicing standards. In January 2014, the Bureau implemented new standards to improve deplorable customer service to homeowners, especially for those who need help saving their home from unnecessary foreclosures.

To closely follow compliance with these standards, NCLR and the National Housing Resource Center surveyed its housing counselors and synthesized the findings in a report last week. We were encouraged that the new rules improved the market for families, but we also see room for improvement. Read more here!

Economic Rights Are Essential to the Pursuit of Happiness

Richard_Cordray_newLast week, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray addressed students at Michigan State University on the anniversary of three pivotal moments in American History: the Supreme Court’s 1954 Brown v. Board of Education decision, the 1964 Civil Rights Act, and the Equal Credit Opportunity Act of 1974. With these three historic events, the United States moved closer to fully realizing the inevitable truth that civil rights, political rights, and economic rights are inextricably linked. They are all necessary for a free and democratic society.

While Brown v. Board of Education and the 1964 Civil Rights Act are relatively known for their roles in reducing legal discrimination, Director Cordray used his speech to highlight a less-known antidiscrimination law: the 1974 Equal Credit Opportunity Act (ECOA), which celebrates its 40th anniversary this year. For the first time, ECOA outlawed discrimination by creditors against borrowers based on race, ethnicity, sex, age, and national origin.

While fairness in the lending law has been on the books for four decades, lending discrimination against people of color persists today. People of color have always been targeted by subprime lenders, but the housing crisis fanned the flames of predatory practices as lenders offered risky mortgages that ultimately led to default and foreclosure, pushing millions out of their homes. Latino wealth was decimated, and the racial wealth gap between Latinos and Whites continues to widen more than ever.

Even when controlling for similar credit profiles, research shows people of color routinely pay significantly more for auto loans than Whites.

Last December, NCLR strongly supported a historic $98 million settlement between the CFPB and auto lending giant Ally Financial. In violation of the ECOA, more than 200,000 Hispanics, Asians, and Blacks were charged higher rates for auto loans.

Despite its efforts to root out unscrupulous lenders in the auto sector, the CFPB has its hands tied due to the exemption of the real culprits in auto loan discrimination against minority borrowers: the car dealership lenders who set initial loan prices for borrowers. Despite the fact that auto lenders play a pivotal role in working with customers and setting auto loan prices, the CFPB has no oversight authority of the dealers because they are not considered to be engaging in financial activities.

The auto market must not be exempt from the preservation of Latinos’ economic and civil rights. Like buying a home, the decision to buy a car often involves a large loan paid over a period of years, amounting to the second most expensive purchase most borrows will make in a lifetime.

As of today, laws like the Equal Credit Opportunity Act are in place to protect people of color from discrimination, but ongoing price discrimination against minority borrowers doesn’t reflect this resolution.

To create a fully fair and equitable market, the CFPB should be granted authority over the auto market to directly enforce the Equal Credit Opportunity Act and all relevant antidiscrimination legislation.