Filed under: Lynnette Khalfani-Cox
But six months before the CFPB makes it official debut -- on July 21, 2011 -- the agency is already facing a number of potential threats that could prove worrisome for consumers, especially minorities. According to a coalition of consumer advocates and civil rights groups, which on Friday released a progress report on the efforts thus far to get the CFPB up and running, the government has done a good job to date in preparing for the CFPB's upcoming launch. However, members of the coalition expressed serious concerns over issues which might impair the agency's ability to carry out its consumer protection mandates.
Nancy Dirkin, executive vice president of the Leadership Conference Education Fund, said it has been "extremely disturbing" to hear some politicians and others questioning funding to the CFPB and potentially "undermining" the CFPB's independence by granting veto power to other agencies.
Earlier this week, Rep. Randy Neugebauer (R., Texas) sent a four-page letter to Elizabeth Warren, who is currently charged with readying the CFPB for its launch, expressing concerns that Republicans have with the CFPB. Among other things, Neugebauer questioned the CFPB's $200 million in annual funding. But Dirkin said keeping adequate support for CFPB would be critical in reining in lending abuses.
According to Dirkin, for years the civil rights community has decried the "deceptive and predatory tactics that Wall Street and the big banks were using to grow rich at the expense of Main Street .... especially communities of color." Nevertheless "it took a near meltdown for Congress to heed those warnings," Dirkin said in a conference call with reporters Friday.
During the economic downturn, "many African Americans and Latinos lost jobs, homes, and savings," Dirkin said, adding: "It will take years for those communities to recover," even though Wall Street has already largely recovered, in terms of profits and bonuses. Keeping funding intact for the CFBP is vital to "curbing the excesses of the big banks and credit card companies," she said.
Financial reform, officially called the Dodd-Frank Wall Street Reform and Consumer Protection Act, will impact consumers in many ways. With the new law, virtually all financial transactions consumers makes with banks -- such as filling out a home loan application or applying for a credit card -- will in some way be subjected to scrutiny by the CFPB. So consumer advocates are watching closely to see not only whom President Obama will name to head the agency, but also how efficiently the agency is operating in the meantime.
Travis Plunkett, legislative director at the Consumer Federation of America, offered an assessment of initial efforts by CFPB "to stand the agency up and make it functional." Plunkett gave the CFPB high marks so far for hiring qualified staff; creating solid enforcement procedure; establishing key systems (such as an Internet portal, which will launch in a few weeks); and proposing a structure that will allow the agency to fulfill its research, policy and educational goals.
For all its progress thus far, Pamela Banks, senior attorney with Consumers Union, nonetheless urged the CFPB to be vigilant in addressing several issues, including mortgage servicing, overdraft protection and prepaid cards. Citing the foreclosure robo-signing scandal and the "failure of loan modifications" in the U.S., Banks said: "Our system of mortgage servicing is broken and needs to be fixed." Many institutions "favor foreclosure over home preservation," she said, adding that today's overdraft protection programs from many banks are likewise "simply predatory" and that prepaid cards are often loaded with "unfair fees."
Janis Bowdler, director of the Wealth-Building Policy Project at The National Council of La Raza, echoed Dirkin's sentiments, saying a strong CFPB was critical to protecting the public. She also said that in the long-run the CFPB will need to address a number of issues that are of importance "to women and communities of color." Among the issues she highlighted were:
-Enforcing the Credit Card Act passed in 2009, and making sure that deceptive marketing practices by some banks were halted.
-Reining in abuses in areas of high cost lending, such as payday lending and auto title lending.
-Peventing predatory mortgages.
-Scrutinizing the credit reporting system in the U.S.
Data from the Federal Reserve and elsewhere have shown that blacks, especially black women, were two to three times more likely to receive predatory home loans during the mortgage boom, even if those black women had good credit and solid finances. In some cases, predatory lending prevailed; in other cases, it was just outright fraud inflicted upon unsuspecting consumers.
"We want the Consumer Financial Protection Bureau to be strong, well-funded and able to (outwit) scammers," Bowdler said, adding that financial con artists have typically been "one step ahead of regulation."
Lynnette Khalfani-Cox, an award-winning financial news journalist and former Wall Street Journal reporter for CNBC, has been featured in the Washington Post, USA Today, and the New York Times, as well as magazines ranging from Essence and Redbook to Black Enterprise and Smart Money. Check out her New York Times best seller 'Zero Debt: The Ultimate Guide to Financial Freedom.'