Biden administration should restore and strengthen consumer protection
The Consumer Financial Protection Bureau (CFPB) under the Trump administration gutted consumer protections for four years, putting low-income families at risk of exploitation by predatory lenders. The new Biden administration should prioritize restoring and strengthening federal consumer protections to prevent further harm to these families.
The Trump administration and allied interests have repeatedly sought to erode the independence and authority of the office by reducing its transparency, dropping some investigations, delaying or removing regulations, and successfully challenging the independent structure of the office. office in court. The bureau is the only federal financial watchdog in the United States – its erosion has left people with dangerously poorly standardized federal protection against predatory lenders.
The economic fallout from the COVID-19 pandemic has plunged many families across the country into financial distress, making strong consumer protection all the more important. As federal relief programs have not adequately assisted workers in their economic recovery, people living in poverty are less and less protected from predatory lenders, including payday lenders who offer low loans. amount at exorbitant interest rates. These lenders often target low-income Black, Latin American and Native American communities, taking advantage of the financial vulnerability of borrowers.
Along with the overturning of important rules by the bureau, enforcement actions by the CFPB decreased by 80% between 2015 and 2018, and monetary assistance provided to victims of illegal consumer financial practices decreased by 96%. The Biden administration should reverse this trend and Congress should support it.
Advocates have already started leading the charge to strengthen consumer protection in anticipation of the new administration. On October 29, the National Association for Latino Community Asset Builders, represented by Public Citizen and the Center for Responsible Lending, sued the office for repealing key aspects of a rule governing payday lenders and auto lenders.
Voters are also showing a desire for tighter financial regulation. On polling day, for example, voters in Nebraska approved Measure 428, which will put a 36% annual limit on the interest rate on payday loans, in a state that previously hit an average rate of 404%. A rate of 36% always adds up over time, but this reduction makes significant progress towards greater economic and racial justice.
Earlier this year, to fill gaps in national consumer protections, California lawmakers passed state legislation that could have a significant impact on the ability of low-income families to access food, shelter, and access. other basic needs. Before the onset of the pandemic, California assembly member Monique Límon offered to create the California Department of Financial Protection and Innovation. Govt. Gavin NewsomGavin NewsomSanders urges support for Newsom in new California recall announcement Gavin Newsom thought he could override Constitution – now faces recall The Hill’s Morning Report – Presented by AT&T – Biden tested by Afghanistan exit , Ida’s wrath PLUS signed the bill in September, giving the new department the power to monitor and prevent harmful activities by predatory lenders and debt collectors from January.
The efforts of states such as California are crucial, but leaving people dependent on the discretion of their state governments to prevent abuse by deceptive lenders is not enough – and would amount to years of progress. . The CFPB was created in part because, historically, few states have sufficiently protected their consumers from financial abuse.
Failure to enforce federal consumer protections and systematically reducing existing regulations has the dangerous potential of allowing predatory lending to be prosecuted, especially where state-level protections are lacking. As our research has shown, allowing lenders to operate unchecked has affected the ability of many consumers to meet their basic needs, such as food and shelter – rights protected by international human rights law. man.
The passage of Nebraska Measure 428 and the creation of the California Department are positive steps for consumer protection and, if properly implemented, could play an important role in mitigating the effects of the economic recession on low-income families in these states.
But weakening national protections are hurting consumers across the country. Organizations like the National Association for Latino Community Asset Builders, Public Citizen, and the Center for Responsible Lending are doing essential work to restore crucial federal protections.
It is encouraging that President-elect Joe BidenJoe Biden Progressive Democratic lawmakers urge Biden to replace Powell as Fed Chairman Pentagon posts photo of last soldier to leave Afghanistan overnight Defense and National Security – America’s longest war is on finish MOREThe CFPB review team includes volunteers with extensive experience in consumer advocacy. Among them are Leandra English, former deputy director of CFPB who helped found the agency, and Manny Alvarez, commissioner of California’s new consumer protection department. The Biden team should prioritize appointing a CFPB director who is committed to strengthening regulations that protect consumers. In addition, the new administration is expected to work with the candidate to establish a strong regulatory agenda independent of industry influence, including considering a federal cap on interest rates and reinstating and tightening restrictions on lenders. predators.
By rebuilding the CFPB and working with the agency and Congress to put in place strong consumer protections during a time of great need, the Biden administration can begin to tackle entrenched racial and economic injustice and begin to do better. protect the basic human rights of consumers.
Namratha Somayajula is a senior business and human rights associate at Human Rights Watch. Follow her on Twitter @namratha_soma.
Editor’s Note: This article was edited after publication to correct the name of the Center for Responsible Lending.