WORD ON THE STREET: The NAACP feels strongly that a robust Consumer Financial Protection Bureau (CFPB) is not only necessary in our nation today – it is crucial. For too long, too many consumers – particularly racial and ethnic minority Americans – have been disproportionately underserved and even targeted by unfair or downright unscrupulous financial services companies. The result has been dramatically diminished opportunities and an inability to build wealth or, in too many cases, to own a home or even buy a car.
More than four years ago, I testified before the Senate Banking Committee about predatory lending in the home mortgage and refinancing market, and the racial disparities that existed. At that time, I stated that predatory lending is unequivocally a major civil-rights issue. As study after study has conclusively shown, predatory lenders target African Americans, Latinos, Asians and Pacific Islanders, Native Americans, the elderly and women at such a disproportionate rate that the effect is devastating to not only individuals and families, but whole communities. Predatory lending stymies families' attempts at wealth-building, ruins people's lives and, given the disproportionate number of minority homeowners who are targeted by predatory lenders, decimates whole communities.
It is because of this continuing disparity in treatment, and the blatant targeting of racial and ethnic minority communities by exploitative financial service companies that the NAACP joined many other national civil-rights organizations in applauding the creation of the CFPB under last year's Dodd-Frank Act. As a matter of fact, many civil-rights organizations – including the NAACP – testified before this very committee on the need for a single, robust, independent agency charged with protecting consumers and ensuring that racial and ethnic minority Americans have the same access to credit as all other Americans.
In the past, most institutions were either regulated based on how they were ‘chartered’ or were not covered by federal regulators at all. Under the old system, five federal agencies played a role in watching how financial institutions complied with consumer and civil-rights laws, while three federal agencies provided additional enforcement authority. There was not a single entity charged with ensuring that all consumers were treated equally and fairly.
Under the Dodd-Frank system, for many financial institutions, consumer financial protection will now be the sole focus of a single agency: the CFPB. The CFPB will have broad authority to write rules, supervise a wide variety of financial institutions, and enforce federal fair-lending and consumer-protection laws.
Fair lending is explicitly built into the CFPB's mission, structure and research mandates. The CFPB is tasked with the responsibility to seek to implement and, where applicable, enforce federal consumer financial protection law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent and competitive.
In short, a robust, functioning CFPB will work through rulemaking, enforcement and research to ensure a more fair and equitable financial playing field. The NAACP is particularly pleased to note that the CFPB will be looking at almost every aspect of financial services, including mortgage lending, credit cards, overdraft fees and payday loans.
I would like to state unequivocally for the record that the NAACP staunchly opposes any moves that may weaken or undermine the CFPB or otherwise impede it from reaching its full potential. Any proposals that would result in a weakening of the mission of the CFPB would result in fewer protections for American consumers in general, and racial and ethnic minorities in particular, as they attempt to manage the often confusing world of finances, mortgages and credit.
Emasculating the CFPB, before it even gets off the ground, would result in a return to the system of inadequate financial supervision that failed taxpayers, depositors, investors, homeowners and other consumers. Allowing continued predatory lending to consumers will inject greater risk into the financial system. That will raise the threat of a repeat of the Wall Street-caused financial crisis that cost Americans millions of lost jobs, billions of dollars in taxpayer-funded bailouts and trillions of dollars in lost home values and retirement savings.
It will also perpetuate the targeting of racial and ethnic minority communities by unscrupulous wealth-stripping predatory lenders. Even if we learned nothing else over the past five years, we should now know better than to allow this to continue.
Hilary O. Shelton is the director of the NAACP's Washington bureau and the organization's senior vice president for advocacy and policy. This article is adapted and edited from testimony presented April 6 before the House Financial Services Committee's Subcommittee on Financial Institutions. The full text is available online.
