Director of the Consumer Financial Protection Bureau
Michigan State University College of Law Commencement
East Lansing, Michigan
May 11, 2012
Muscle up: The Power of Consumer Self-Protection
Thank you very much. It always feels great to be back in East Lansing, where I spent some really special years as a college student. In fact, I was a classmate of Magic Johnson – though he stayed only two years before finding fame and fortune, whereas most of us stayed for four years, working on finding ourselves. I do understand, however, that he later returned and finished his degree – not because he had to, but because he promised his mother that he would. (So as I try to slip a fistful of trite but meaningful life lessons into my speech today, let me start with this one: Always keep your promises to your parents. And the corollary is, think carefully before you make promises to your parents!)
I thank my friend Mike Morris, who invited me to speak today and has been a wise and trusted counsel to me over the years. It is a privilege to be a part of this commencement ceremony. You have piled up so much hard work and dedication for years, all pointing toward this day. As I look out on the Class of 2012, let me say, quite emphatically, that your energy, your commitment, and your ideas are sorely needed in this country.
We are turning the corner out of the most damaging and frightening financial crisis of our lifetimes. As we move into a future reshaped by this crisis, we will be counting on the best and brightest minds of this generation to help drive that future in a direction consistent with the broad upward historical arc of this great country. You have shown that you are among those best and brightest minds and you have earned your role in our nation’s future.
As the first Director of the new Consumer Financial Protection Bureau, I am well aware of some of the challenges you are facing. You and your fellow graduates are confronting a tough job market, a widening gulf between the rich and the poor in our society, and, perhaps most acutely, the largest student loan debt burden in the history of the United States. These are significant issues not only for you, but for all of us who care deeply about our country.
But my parents always taught me too that it is good to have challenges. For a long time I was not sure I really understood why they said that – would it not be more desirable to have life just go along smoothly and be achieving your goals more easily? My Dad, now 94 and going strong, grew up during the Great Depression and for that generation significant challenges were simply an unavoidable part of life, so perhaps you might as well see the positive side of them.
Yet over the years, I have come to understand my parents’ perspective better and relate to it more. (So lesson number two is: if your parents don’t make a lot of sense now, your ability to perceive the sense in what they are saying may increase over time. I am sure I say that, in part, because I am a parent of teenagers myself!) The challenges we face are what make life interesting; challenges make life worthwhile. Challenges are how we grow, how we test ourselves and find out what we are made of. And I am convinced that you are up to meeting these challenges. Graduating from the MSU College of Law, you are well prepared for the tasks and the opportunities that lie ahead.
For those of you who do not know what the Consumer Financial Protection Bureau is, let me take a minute to describe what we do. And let me explain why, no matter who you are in this audience, we are going to make a difference to your life.
The Consumer Bureau is an independent federal agency born out of the 2008 financial crisis. The United States learned – or relearned – a hard lesson in that crisis: unregulated or poorly regulated markets destabilize the economy and undermine the general welfare. The Consumer Bureau was created to help make sure the financial meltdown does not repeat itself.
How do we confront that challenge? Our task is straightforward: To make consumer financial markets actually work for consumers. The markets we oversee involve the kinds of financial products that are rooted in the daily lives of all Americans. Mortgages help people buy homes and pay for them over time. Credit cards give us convenient access to money when we need it. Student loans allow people who lack means but have talent and ambition to pursue their deepest aspirations.
We are the consumer watchdog, and we want financial institutions to know that if you cheat your consumers or treat them unfairly, we will take action. But we also work to promote responsible behavior by consumers. We have seen all too clearly that when consumer financial products are misused or misunderstood, they can do real damage to people’s lives. People need to make their own decisions – nobody can do that for them – and they need to be responsible for their decisions.
Ever since we became an independent agency less than a year ago, we have been working to create a better marketplace. We are overseeing both big banks and nonbanks. We are writing new rules of the road. And we are educating and empowering consumers. We have many tools at our disposal to improve life for American consumers.
One area we are working on is student loans. As you may know, total student loan debt in this country recently crossed the $1 trillion mark, surpassing credit cards as the largest category of consumer debt outside of mortgages. To help bring greater transparency to this critical market, we have launched new tools to help students directly compare the true costs of the schools they are considering. For those of you with federal and private student loans, we have another tool on our website to help you understand your repayment options. These tools are available at www.consumerfinance.gov. We can be a trusted resource, providing you with our best neutral information and guidance.
Our goal is clear: Make consumer financial products safer. This is good for consumers, for the honest businesses that seek to serve them, and for the American economy as a whole.
We deeply believe that this country needs a dedicated federal agency with a singular focus on consumer financial protection. But the American people have never rested content in dormant reliance on the government. We each have the power, and the duty, to look out for ourselves. And there is no substitute for people protecting themselves.
As America finally emerges from this deep recession, as it has begun to do in earnest, we must create a new normal where every consumer makes a conscious effort to take back the power and influence that have slipped from our grasp over the years. Now is the time and the opportunity is right in front of us. With all the 21st century technologies available for us to make our voices heard, we now can identify and resolve problems from the bottom up rather than from the top down.
At the Consumer Bureau, we aim to help American consumers recognize that they each have power. We believe in the free markets and seek to make them work. In that market, each transaction and relationship has parties on either side of the table that exert their authority against one another. The word “customer” derives from the word “custom,” because no financial firm can survive without loyal customers who are willing to provide it with their customary or regular business. That is very definite kind of power. And when you add voice to your choice, you can exert even greater influence on the market.
Businesses used to subscribe to the motto that “The customer is always right.” Of course, this statement was untrue, but it expressed an attitude of respect and appreciation, and a commitment to excellent customer service. We have every right to insist on that kind of service, and to speak up loudly or vote with our feet when it is not provided and our complaints are ignored. A large array of individuals forms the essential customer base of every financial institution in this country, and it is important that they insist on being treated fairly in the marketplace.
I have said that the Consumer Bureau has various tools to protect consumers. But you have your own tools available also. That is the heart of your power. In another era, more than a century ago, individual workers decided to band together and act collectively. Standing shoulder to shoulder in the workplace, they overcame great resistance to win new rights and protections that translated into economic gains.
Today, the new technology that links people together supplies the same conditions for consumers to “muscle up.” Instead of complaining bitterly to nobody in particular, you can now seek out other customers and share your experiences. Social media sites like Facebook and Twitter offer platforms that are almost limitless.
Consumers are no longer alone, confined by physical isolation to begging for fair terms. You can reward and spread the word about the good businesses that treat you well, and you can punish and call out those that do not. The power of social media, as we saw in the political realm with the Arab Spring, is that it can generates mass power by joining human beings together with the greatest of ease. In the economic sphere, the result can be a critical mass of consumer power.
I am completely confident that the biggest challenges we face today will be solved by your generation. In fact, I will flatly assert that the planet Earth has never seen any power to match human ingenuity. Be it climate change, energy depletion, disease, hunger – name a hard problem and I feel certain that by the time I am elderly you will have made great strides toward ameliorating them all. (So my third sneaky lesson today is: always value the resourcefulness of human beings, for talent, character, and persistence can move mountains.)
Young people like you are already using their talent and ingenuity to help fashion their own brands of power. Consumers speaking collectively made their voices heard loud and clear in the past year, reversing unpopular product changes proposed by companies in several sectors of the economy. In bursts of assertiveness, consumers rebalanced the power arrangements they had found (but not accepted) in the marketplace.
In the alternative, you can sit on the sidelines. You can wring your hands. You can retreat into negativity. But if you do that, you will accomplish nothing. You will condemn yourself to a world full of tricks and traps that harm and oppress consumers.
So today I tell you: Translate your beliefs and your values into action. This is the best tradition of American citizenship, and it is the active element of American capitalism, which operates by the push and pull of market forces. YOU are the market, and may the force be with you. Raise your collective voices with a strategic passion for creating financial equality between yourself and all the businesses that fundamentally exist to serve you and earn your “custom.”
(My fourth message to you then is this: You can and must be your own consumer protector.) Learn about personal finance. Ask questions. Know when a big decision – like buying a home or borrowing for an education – really will matter for years to come, and take your time with those decisions. Be fearless. Use every tool at your disposal to advance your interests and the interests of your fellow consumers. Create your own networks. When you join together, you create real power to gain respect and fair treatment, which is exactly what you deserve.
You are soon going to be lawyers, and you have already shown that you do some things well. You naturally ask questions. As Thomas Jefferson once said, “It is the trade of lawyers to question everything, yield nothing, and talk by the hour.” Feel free to curb your enthusiasm on talking by the hour, but keep asking these questions. And do not easily accept answers if you find them to be unsatisfactory.
Also, do not rely on others to express your opinion for you. At the Consumer Bureau, we seek direct input from consumers. We always hear from the organized groups, but you can balance that by telling us what you think. Weigh in. By doing so, you can extend the power of the Consumer Bureau to help secure the kind of consumer financial marketplace that you want to see. As Charles Fried has observed, “Lying, cheating, and stealing are not traditional American virtues.” And with your input we will actively root them out of the marketplace.
But we need informed citizens to hold the government accountable for getting results and finding solutions. At the Consumer Bureau, we are redefining what it means to be a federal government agency by achieving as much transparency as we can with the public. You and millions of other Americans are our bosses. We work for you.
As we saw over the past several years, a global financial crisis affects everyone. You had nothing to do with irresponsible lending and reckless bets on Wall Street, but one thing you can count on is that in a financial panic everyone – even the innocent – will end up paying the price. And the highest price was paid by average Americans who lost jobs, lost homes, and saw their retirement security diminished.
But equally important is that we now have the tools to work together to move the economy forward and make financial services responsive to customers. Interconnectivity works in both directions; it can be bad but it can also be good. Government can do its part, but in the United States the ultimate power has always resided with the people themselves. (And that is the last of my fistful of lessons for you. Many things have changed in our country through the years, but this has never changed: the power in our society ultimately resides with the people.)
You started law school in the throes of a financial crisis. Over the past three years, you have learned to step up, speak out, and drive action. This is your moment to become stronger citizens and more resourceful consumers. I have every confidence you will succeed. Go and get us the future that we know we all deserve.
Thank you and congratulations.