The US Senate confirmed Rohit Chopra on September 28 to a full five-year term as director of the Consumer Financial Protection Bureau (CFPB). Chopra returns to the agency where he previously helped design and implement key safeguards to level the financial playing field for consumers and businesses alike.
At a time when the still-spreading COVID-19 pandemic has left much of Black America – its people and small businesses – financially marginalized, an active and aggressive consumer cop on the beat is especially needed . Based on his previous tenure with the agency and as a commissioner with the Federal Trade Commission, Chopra is expected to advocate for more aggressive enforcement and greater liability for bad actors, including corporate executives, regardless of whether they are in the trillions Dollar of the nation trades student loan debt, predatory payday loans or ensuring accurate credit reporting to support equal access to affordable credit.
Chopras Remarks before the US Senate Banking Committee during its March hearing reflect his commitment to financial fairness.
“[W]e must not forget that the financial lives of millions of Americans are ruined… Consumers continue to discover serious errors in their credit reports or feel compelled to make payments to collection agencies for bills already paid or never owed, including bills for medical treatment related to Covid -19,” Chopra testified.
“Congress has tasked the Consumer Financial Protection Bureau with carefully monitoring markets to identify risks, ensure compliance with existing laws, educate consumers and encourage competition,” he continued. “Not only does this help protect Americans from fraud and other unlawful behavior, it also ensures law-abiding businesses, regardless of size, can compete… I promise to be a good partner to each and every one of you and open to the mission.” the agency’s approach is intelligent and tailored to market conditions.”
An aggressive combination of enforcement and regulation would go a long way in solving many of the financial problems plaguing black America.
Analyzing complaints obtained through census data, a new CFPB reportThe study, released in September, found that communities with different racial or ethnic characteristics experience the credit market differently. Additionally, census tracts with the highest proportion of Black or African American consumers file the most complaints per resident.
“Starting in March 2020, the number of consumers with credit report complaints increased rapidly from levels already elevated in 2019…A large proportion of complaints from census areas with high Black or African American proportions involve credit reports,” the report states .
Inaccurate or outdated credit reports can negatively impact access to employmentaccess to credit and the cost of borrowing for individuals and businesses. In recent years, more and more employers have been using credit reports as part of their job applicant screening process. Applicants found to have an incomplete or risky credit profile may be disqualified from the examination. Also if it is a small business or consumer is applicable for credit, the cost may increase due to negative credit reports. Worse still, those who try to correct mistakes on the credit report often face lengthy delays or rejections, according to the CFPB report.
“Given the magnitude and persistence of racial wealth disparities, these disparities are hardly surprising — but they underscore the active role consumers in black or African-American communities are playing in trying to address credit issues. … Past barriers that limited access to mainstream ethnic minority credit, the long-term effects of the 2008 mortgage crisis, and ongoing inequality in access continue to define the types of choices consumers have — and these contexts shape consumer interactions with the CFPB,” he concludes the report.
Similarly, several independent research reports demonstrate the severe financial impact of student loan debt.
“[B]Student shortages leave college with the highest average debt per borrower and per graduate across all racial groups,” according to “Legislation, Politics, and the Black Student Debt Crisis‘, published in 2020 by the NAACP. “This is true for both bachelor’s and associate’s degree holders — both of whom are more likely to borrow and borrow more to fund their education — as well as black students in all public and private sectors of higher education.”
According to the Brookings Institutionfour years after graduating from college, the average black graduate owes $52,726 in college debt, while the average white graduate owes $28,006.
“Extensive research has found that black borrowers and other borrowers of color tend to have more difficulty repaying student loans than their white counterparts because of past and ongoing racial discrimination,” said Julia Barnard, a senior researcher at the Center for Responsible Lending. wrote in a policy brief published this summer. “They are also among the communities that have been hardest hit by the current pandemic and its impact.”
The spreading impact of high and long-term student debt often delays home-buying decisions, contributes to high levels of financial stress, and can result in working more than one job to pay off the debt. These real-life concerns are familiar to Chopra.
Following the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, Chopra helped found the CFPB in 2011 and served as deputy director and overseer of the student loan agenda. Shortly thereafter, he was appointed the Student Loan Ombudsman, where he led efforts to increase competition in the student loan funding market and develop new tools to help student loan borrowers make smarter decisions.
Under Chopra, CFPB provided hundreds of millions of dollars in refunds to borrowers who fell victim to fraudulent and unlawful behavior by loan servicers, debt collectors, and for-profit college chains.
By the end of its first decade of operation, CFPB returned more than $12 billion to more than 29 million consumers and fined bad financial players in other areas of consumer finance, including prepaid cards, credit repair, debt service, and pawn and home loans.
However, under the Trump administration, consumer reimbursement all but disappeared and many of the hard-won regulations were rolled back. A spate of political appointments replaced career civil servants, and the agency’s actions turned its eyes away from consumers, favoring private enterprise and little regulation instead
These actions were in direct contradiction to the previous five years, during which the CFPB had held a series of public forums across the country and published research and analysis related to the high-priced small loans. The resulting payday rule, enacted under CFPB’s first director, focused on two lending concerns: the ability to repay and ending the automatic seizure of consumer payments from checking accounts.
While most forms of consumer credit involve underwriting to ensure repayment ability, payday loans usually only require proof of income and an active checking account. With lenders having direct access to checking accounts, extensive research has found that most borrowers are unable to meet other financial obligations. In the worst case, when excessive overdraft fees are incurred, banks will close consumers’ accounts, making consumers more dependent on other costly ancillary financial services.
Despite the persistence of predatory lenders, Director Chopra begins his work with the support of a 138-strong coalition of state and national attorneys. In addition, key federal lawmakers such as Rep. Maxine Waters, chair of the House Financial Services Committee, and Sen. Sherrod Brown, chair of the Senate Banking Committee, have also offered their support.
In a speech ahead of the Senate vote, Chairman Brown addressed directly the hopes of consumers across the country.
“It’s not surprising that most people don’t believe there’s someone on their side fighting for them in the federal government, but we know that’s not true,” Brown said said. “So Rohit Chopra will prove them wrong. He will fight for those who feel left alone.”
Charlene Crowell is a senior fellow at the Center for Responsible Lending. She can be reached at Charlene.email@example.com.