Why the New Consumer Protection Agency is A Matter of Civil Rights

It’s been four years since NAACP Director Hillary Shelton first told the Senate Banking Committee that “predatory lending [was] unequivocally a civil rights issue.” Since then, millions of Americans — disproportionately racial and ethnic minorities — have faced foreclosure. Reports have called this wave of foreclosures “the greatest loss of wealth to people of color in modern history.”

As the economy slowly climbs out of recession, Congress must ensure that the newly created Consumer Financial Protection Bureau (CFPB) remains a strong enforcer against the abusive and discriminatory financial practices that caused so many minorities to lose their homes.

CFPB will commence operations in July, and will be the primary agency enforcing consumer protection. In a congressional hearing in April, Shelton reiterated his case to Congress, testifying in support of the CFPB. His testimony provided an important rebuttal against four recently introduced legislative proposals that seek to weaken the agency’s enforcement power. By highlighting the racial disparities that exist in the financial markets, Shelton laid out an important argument for why a strong CFPB is necessary to protect consumers, particularly racial and ethnic minorities who have long been victims of financial abuse and discrimination.

Prior to the financial crisis, the role of consumer protection wasn’t clearly defined and responsibilities to enforce it were spread across several federal agencies. This lack of clarity, coupled with a lack of will on the part of regulators to use their enforcement powers, allowed financial abuses to proliferate — especially in communities with relatively limited financial knowledge and information. Banks took advantage of this, pushing predatory loans even when many were qualified for traditional loans. After a long history of redlining, in which people were systematically denied access to financial services, many underserved communities with large populations of blacks and Latinos were given the choice between a set of bad financial products or nothing at all.

According to Shelton, the reality is that “racial and ethnic minorities are treated disparately” when it comes to financial services. Essentially, they are confined to two options — predatory lending and restricted access to mainstream financial products. “As a result,” Shelton says, “racial and ethnic minority Americans are faced with dramatically diminished opportunities to fulfill the American dream and build any sort of wealth.”

The CFPB would consolidate consumer protection under one single entity and enforce federal consumer financial protection law so that "all consumers have access to markets … and that markets for consumer financial products and services are fair, transparent, and competitive.”

As Americans try to navigate their way out of the financial crisis, Congress must ensure that they are protected against future financial abuses. Not only will the CFPB help prevent such abuses from happening, it will also level the financial playing field for the many racial and ethnic minorities who have historically been discriminated against in the world of financial services.

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