Washington, D.C. – Good morning, and thank you for inviting me to be here with so many people who share similar goals and ideals for our society. The thread that ties us together is the difficult, important, and humbling mission of seeking to empower the economically vulnerable among us.
At the Consumer Financial Protection Bureau, we, like you, have witnessed the havoc that financial products can cause for consumers. The recent financial crisis, and the deep recession that followed in its wake, delivered a devastating blow to American households. In recent years, we have seen household wealth shrink by trillions of dollars and incomes decline. As we continue to dig out from the crisis, the Census Bureau found that 46 million Americans were living in poverty in 2011.
And while these numbers are striking, they do not convey the larger toll on people of low to moderate income. As those who work closely on these issues know, it is especially expensive to be poor. Time is money, and when the compensation for your time is meager, you can work long hours and still produce an insufficient income. At the same time, the marketplace is hostile to those in poverty, who often pay higher prices for consumer goods, including financial products and services.
These factors heap disproportionate burdens on people’s lives. All day long, you encounter dignity issues that loom large as businesses show disrespect for your time and noticeably less enthusiasm than they muster for those more fortunate. The emotional cost of these experiences is not knowable, but it is inevitably accompanied by mounting feelings of frustration, helplessness, and marginalization. The doctrines of equality that mark the aspirations of our political life in America can ring quite hollow in the economic realm.
Our country is founded on the principle of equal opportunity: that each of us has “inalienable rights” to “life, liberty, and the pursuit of happiness.” We have long been nurtured by the promise of upward mobility, and we are deeply committed to the notion that our society has done away with any formal class or caste system. So we like to suppose that any person, regardless of where he or she begins life, can find some way to climb the economic ladder. As Horatio Alger put it, with some “luck and pluck,” we can all dedicate ourselves to “strive and succeed.”
But in the nonfiction world, for too many people, the concept of amassing the necessary savings to create upward mobility is more of a tantalizing taunt than a tangible prospect. Some 43 percent of households nationwide and 65 percent of households of color are “liquid asset poor,” meaning they have little or no savings to fall back on in the case of a financial emergency, such as a layoff. For economically vulnerable consumers, even with meticulous budgeting, the task of saving money remains an enormous challenge. And in the wake of the recent financial crisis, that upward climb has become even steeper.
The stakes are higher when every dollar counts. When even just a single unexpected fee or expense can upset the careful balance of your finances, life is exceedingly fragile. Enmeshed in this vicious cycle, you can feel the pressures chipping away steadily at your morale and your resolve.
Robert F. Kennedy once said, “The challenge of politics and public service is to discover what is interfering with justice and dignity for the individual here and now, and then to decide swiftly upon the appropriate remedies.”
At the Consumer Bureau, we are mindful of that challenge and committed to addressing the concerns of the financially disempowered. We recognize that consumers have to climb the economic ladder on their own – we cannot step into their shoes and do that for them. Individual responsibility, however difficult it may be in different circumstances, remains at the core of American economic life. But what we can do is hold the ladder steady for people. This is an important role. We want everyone to be able to access that ladder and have a fair chance of getting up. Through our work, we can help make sure that it is as safe as possible to undertake that climb.
The Consumer Bureau was created amidst the worst financial crisis since the Great Depression. Part of our mission is to help avert future crises by protecting consumers and drawing attention to the kinds of irregularities that led to financial catastrophe in this country.
In the mortgage market, in particular, a ragged and ineffective system of regulation allowed bad practices to fester and spread until they infected the broader economy. This market, of course, is the largest source of consumer credit and the most significant determinant of household wealth. Any system is bound to fail if it covers only part of the market; and our system failed because it allowed nonbank firms to engage in lending that was deeply irresponsible and often downright predatory.
The effect of these market problems was to magnify the dislocations of the housing bubble, which infected entire communities. I have walked through a neighborhood in Cleveland, Ohio where every third house was abandoned or in foreclosure, and the other two houses were thus at risk of losing their value, regardless of the care and diligence of those homeowners. Even people with sensible mortgages who faithfully made their payments on time were overwhelmed by the collateral fallout from the foreclosure crisis, which caused the painstaking savings of many low- to moderate-income households to evaporate overnight.
In the throes of this crisis, the Consumer Bureau was vested with authority to provide reasonable oversight of the consumer financial markets. Our first responsibility has been to address the obvious problems in the mortgage market and to provide clearer rules of the road that can help contain the problems that precipitated the crisis. Many of those rules will be finalized by January. For the first time, we have the authority to supervise both banks and nonbank firms engaged in the mortgage market to assure that the rules are being applied evenhandedly. These are important developments. I truly believe that if the Bureau had existed ten years ago, the events that led to the financial crisis could have been averted, along with the tragic reverberations that continue to affect so many Americans. And so we are doing our best to reposition the ladder of opportunity so that it does not fall over again in our lifetimes. We are working to make the mortgage market, and other consumer financial markets, more fair, transparent, and accountable.
We are also focused on addressing practices that are unfair, deceptive, abusive, or discriminatory toward consumers. When we discuss the emotional toll of poverty, we must recognize that one of the greatest assaults upon individual dignity is posed by discrimination. The objects of discrimination are victimized by impersonal stereotyping. Whatever your personal qualities – your character, your determination, your effort – discrimination forcibly diminishes your opportunities by simply lumping you into a category based on characteristics you do not control and that do not define the actual person that you are. That is why it is so important that federal law prohibits lending discrimination based on characteristics such as race or gender, or even on one’s status as a recipient of government assistance.
We have seen in recent years how discrimination deprives people of access to responsible credit and harms entire communities. When someone is unlawfully denied a loan to go to school, buy a home, or start a small business, growth is stunted more broadly and the inequality gap yawns even wider. The evil of discrimination can price out or cut off whole segments of the population from accessing consumer credit.
So earlier this year, we made it a point to declare that we will enforce fair lending laws to protect consumers, including the ban against discrimination in consumer lending based on disparate impact doctrine. We are currently using all of the tools available to us, including both supervision and enforcement, to root out discriminatory lending to consumers. These practices cannot be squared with economic justice, and they are flatly inconsistent with the dignity and self-respect of every would-be borrower.
Moreover, consumers can hardly be expected to climb the ladder of opportunity when financial providers drain their assets by deliberately deceiving them. In July, the Bureau partnered with the Office of the Comptroller of the Currency (OCC) to announce its first public enforcement action against a major credit card issuer that had been using deceptive marketing tactics to pressure or mislead consumers into paying for credit card add-on products.
Those tactics were explicitly targeted at consumers with low credit scores or low credit limits, who could least afford these dubious offers, but who were ripe candidates for such a marketing campaign. The result was to put $140 million back in the pockets of two million consumers. The Bureau and the OCC together collected $60 million in penalties as a deterrent to such activities in the future. After the enforcement action was completed, the company reviewed its practices and decided to cease marketing such products. The Bureau accompanied the final consent decree with a bulletin to put other companies on fair notice that these deceptive marketing practices squarely violate federal consumer law.
On another front, we ran across troubling impersonal treatment of consumers at a field hearing in Detroit on the credit reporting companies. After announcing that we would be instituting supervisory oversight of these companies for the first time ever, we set aside time to hear from witnesses about their own experiences. An elderly woman stood up and told her story about the hard time she was having as she tried to convince the credit bureaus that she is not dead (as shown on her credit report) but rather is very much alive. Although she had made repeated calls and sent in documentation to prove her point, the companies continued to write her off as deceased.
The moral of her story was striking – she found the situation to be a profound affront to her dignity. As she told her story, it became clear that she thought if she were viewed as “somebody,” this would not be happening. Only because the companies apparently viewed her as “nobody,” as counting for nothing, could she explain to herself their stubborn indifference to her plight.
These kinds of stories are keen reminders of why the work we are doing is so critical. All of these companies are or will soon be under our direct supervision to examine whether they are violating federal consumer financial law and harming consumers. The substantial clout they now wield over people’s lives will henceforth be counterbalanced by the oversight of a new regulatory regime.
In order for consumers to be able to climb the economic ladder, they need to be able to avoid stumbling over the tricks and traps they can lead them to drop back a rung or slip off the ladder entirely. Not only is the Bureau working to ensure that financial products are not designed or marketed in ways that hurt consumers, but we want to put people in position to make good choices for themselves, choices that enhance their lives and empower them to succeed.
Our new operations in financial education and consumer response are designed to give people more information so they know how to climb the economic ladder and to hold it steady for them as they go. For over a year now, we have been accepting consumer complaints. To date, we have received over 72,000 complaints on a variety of financial products such as mortgages, credit cards, bank accounts, auto loans, student loans, and other consumer loans. Once a consumer contacts us, we work with both them and their financial institution to help resolve the issue. For many consumers, we are able to get some financial relief. For others, we often can secure other kinds of meaningful relief, such as cleaning up errors, correcting misinformation on credit reports, and providing timely advice on how to address particular issues. That help is available on our website at consumerfinance.gov and by calling 1-855-411-CFPB.
We are also making a concerted effort to educate consumers because we know how complex and confusing the consumer financial marketplace can be. This spring, we launched “Ask CFPB,” an online database that gives consumers carefully considered answers to their frequently asked questions, laid out in plain language. “Ask CFPB” now covers an assortment of financial topics and we are adding more questions and answers in response to suggestions from the public.
We also have our own Financial Empowerment team, operating under the leadership of Cliff Rosenthal. We are actively engaged with Cities for Financial Empowerment and their great efforts as well. Through this partnership, we are working to team up in bringing innovative financial empowerment initiatives to cities across the country, with the shared goal of advancing the financial security of all consumers, especially the most economically vulnerable.
All of this work aims at helping steady the ladder people seek to climb toward a better life for themselves and those they care about. We are grateful that we have colleagues like you who are dedicated to bringing more stability to people’s financial lives. Every one of us deserves the chance to climb that economic ladder. And we also deserve to be treated with dignity and respect, without regard to which rung on that ladder we may have attained. Thank you for all you do to make that so.