New report calls for the CFPB to put consumers in control of their financial well being
The COVID-19 crisis has brought back to light a set of consumer issues that were exposed after the mortgage crisis of 2008, the ongoing vulnerability of consumers to sudden economic shocks, whether personal (like sudden illness) or global (like the COVID-19 pandemic). This year marks the 10th anniversary of Dodd-Frank and the creation of the Consumer Financial Protection Bureau, which began the work of protecting consumers from abusive practices. It is time for the agency to take the next step and aggressively use its existing legal mandate to protect consumers from the abuses of third-party loan servicers, collectors, and credit reporting agencies.
In Extending the Consumer Safety Net: How the Consumer Financial Protection Bureau Can Use Its Authority to Protect Vulnerable Consumers, author Graham Steele (director of the Corporations and Society Initiative at Stanford Graduate School of Business) calls for the CFPB to use its authority under Title X of the Dodd-Frank Act to create a permanent and durable “safety net” that would give consumers universal protections from private financial service providers. Specifically, he calls for the CFPB to issue rules declaring arrangements with servicers, debt collectors, and credit reporting companies as per se abusive, absent the provision of certain specific rights that would constitute the consumer safety net.
These rights include:
- Receiving automatic forbearance for loans being serviced, collected, or otherwise reported in certain life events;
- Hiring or firing any servicer, collector, or credit reporting company that handles their consumer financial accounts; and
- Purchasing and settling any consumer account before it is sold, on the same terms that are available to industry participants.
“For far too long we’ve allowed creditors to reframe financial issues not as a matter of innocent individuals experiencing misfortunes beyond their control, but as a matter of willful ‘deadbeats’ who are unworthy of support,” said Steele. “The structure of this system disproportionately harms Black and brown people, exacerbating the racial wealth gap. It’s time for our consumer finance policy to reflect the lived experiences of millions of Americans.”
Policymakers should not let the current crisis go to waste, nor should they wait for yet another crisis to befall millions of Americans before taking action. You can learn more about how the Great Democracy Initiative is helping policymakers create a more justice economy here.
About the Great Democracy Initiative
The Great Democracy Initiative seeks to develop bold, progressive, and actionable policy plans for leaders seeking solutions to key issues facing our country. Instead of proposing technocratic tweaks or layering new programs on top of a broken system, the Great Democracy Initiative targets the structural problems facing our democracy, including unaccountable policymakers, corporations with outsized economic and political power, and policies that subtly stack the deck against average Americans.