CFPB Director Richard Cordray will leave the agency at the end of the month.
Last week, Richard Cordray announced his resignation from the Consumer Financial Protection Bureau (CFPB), where he served for nearly six years as the agency’s first director. The CFPB is the only federal agency with the sole purpose of protecting consumers, an incredibly important function for all Americans in the wake of the financial crisis.
Under Cordray’s leadership, the consumer agency has helped put Latino families, and all Americans, on a path to greater financial security through its enforcement work. For example, about a dozen CFPB actions have been made against financial companies that demonstrate clear evidence of charging minority borrowers more for products. For example, in 2013, the CFPB ordered:
Altogether, the CFPB has returned about $12 billion in relief to 29 million consumers. We thank Cordray for this service and call for his replacement to defend and extend the bureau’s work to protect American consumers.
By Sabrina Terry, Senior Strategist, Economic Policy Project, UnidosUS
Photo: Got Credit.com
Building credit is an essential part of economic security for any American, but especially low-income Latinos and immigrant families. Latinos, like other communities of color, have historically been shut out of credit-building opportunities and continue to face several obstacles.
Latinos’ financial background make it difficult for them to acquire credit through traditional financial institutions. Per the Consumer Financial Protection Bureau (CFPB), Hispanics are more likely to be “credit invisible” than their White counterparts, and have some of the highest rates of un-scored credit records. These challenges are exacerbated for Latino immigrants who must also overcome language, proof of income, and legal status barriers when navigating the U.S financial system. Despite their economic hardship, Latinos are avid savers and prefer to take a savings-based approach to financial challenges. Yet, savings alone will not help them bridge the gap between their earnings and their expenses or to take advantage of economic opportunities—they also need access to credit.
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.
By Renato R. Rocha, Policy Analyst, Economic Policy Project, NCLR
Last 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.
By Sabrina Terry, Program Manager, Wealth-Building Initiative, NCLR
For many foreign-born Americans, becoming U.S. citizens is an important turning point in their journey for better economic opportunities. With citizenship, an immigrant has access to better jobs, including many public sector jobs. According to the American Immigration Council, immigrants earn 8–11 percent more money once becoming citizens. As such, employment is a common driver for immigrants seeking to become U.S. citizens. In fact, most immigrants come to the United States as working-age adults—between the ages of 18 and 60—hoping to support themselves and their families. By becoming a citizen, an immigrant’s economic outlook increases dramatically and is a critical step in their wealth-building journey; this is particularly true for low-income Latino immigrants.
Wealth is a key component of the American Dream; a necessary step to achieve security and take part in opportunities in the United States. Unfortunately, as it stands, there is a widening racial wealth gap in the United States. In 2013, Whites had 13 times more wealth than a Black family and 10 times the wealth of a Latino family. Furthermore, many Latino immigrant families are already at a disadvantage, as they tend to have lower incomes and struggle to establish savings, let alone build wealth.
What Palomarez’s article fails to mention is that payday lenders specifically target communities of color, and their business model creates a vicious cycle of debt that is difficult for most borrowers to escape. In fact, the typical payday loan carries an exorbitant 391 percent APR, is given to borrowers without consideration of their ability to pay it back, and with direct access to their bank account.
By Renato R. Rocha, Policy Analyst, Economic Policy Project, NCLR
Low- and moderate-income families suffered disproportionate losses of wealth during the Great Recession. Under the conditions that existed before the passage of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, Latinos and other communities of color were not adequately protected from unfair and deceptive financial practices. The lack of oversight allowed for conditions that were ripe for consumer exploitation. NCLR and other civil rights and consumer advocates pushed for an agency that would put families first. The creation of the Consumer Financial Protection Bureau (CFPB) was one of the hallmark achievements of Dodd-Frank.
Today we celebrate the fifth anniversary of the CFPB’s establishment—and what a productive five years it has been. Despite being an infant by federal agency standards, the CFPB has made considerable strides toward making financial markets work for both consumers and providers. Since the inception of the Bureau, the CFPB’s enforcement actions have brought $11.7 billion in relief to more than 27 million consumers.
Many of the Latino community’s struggles recently have centered around economic stability in the wake of the Great Recession. The Hispanic community lost more than 66 percent of its wealth in the recession and has not yet recovered lost ground. In order to understand more about Latino households’ ongoing economic challenges and how they’re overcoming them, NCLR established a Financial Services Advisory Council with the support of Citi Community Development, the Ford Foundation, and Master Your Card: Oportunidad.
The Financial Services Advisory Council is composed of a group of 10 NCLR Affiliates who serve more than 40,000 clients annually and provide input on how their clients are interacting with financial institutions, what products and services are most useful to them, and how they are managing financial stress. Of the nearly 300 community-based organizations that make up the NCLR Affiliate Network, these 10 are economic first-responders in their communities and offer a range of financial counseling and capability services.
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.
NCLR has long supported a strong rule that will take Latino consumer perspectives into account, and which will keep predatory products and practices off the financial market. To better understand why such a rule is necessary, we have shared stories in our Truth in Payday Lending:Stories of Latino Borrowers blog series. Truth in Payday Lending takes a closer look at how real Latinos have fallen victim to payday lending debt traps and the challenges they face to get out of them.