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Remarks of Deputy Director Zixta Martinez at Consumer Advisory Board Meeting

Good afternoon, and thank you, Manny, for the introduction. Let me first extend a special thank you to the Consumer Advisory Board’s chair, Leigh Phillips – I greatly appreciate your service and willingness to take on this leadership role.

When Congress created the CFPB, it entrusted the Bureau with carefully monitoring financial markets to spot risks, ensure compliance with existing laws, educate consumers, and promote fairness and competitiveness. To help meet its statutory requirements, Congress provided for a consumer-centric advisory board to ensure the voices and concerns of American families remained front and center. Today, the Consumer Advisory Board serves as a front-line proponent for the people we serve by helping the Bureau spot risks, identify opportunities, and create a fair and competitive market free from discrimination and bias.

Your knowledge of consumer struggles and the reasons for those challenges are important, and, in our current environment, they are vital. We need your expertise to enhance our understanding of the critical issues confronting consumers and impacting the American economy. The pandemic laid bare racial and economic inequities throughout our society. For example, millions of families still face the threat of foreclosure or eviction. Those families are disproportionately Black and Hispanic. Pandemic-fueled housing insecurity threatens another historic loss of wealth within underrepresented communities, just as we saw happen over a decade ago with the subprime mortgage crisis and Great Recession. The nation has a choice: repeat the old cycle of building and hollowing out the wealth and progress of historically marginalized communities or break with history and help all consumers and communities recover and thrive. All of you are here because you, like myself, believe the second option is the better option.

Consumers deserve nothing less than the CFPB working with its partners, which include all of you, to tackle the pressing problems that families face in their financial lives during this critical moment for our country. Because the U.S. is not just recovering from the devastating financial effects of the pandemic; consumers must also maneuver the attendant consequences and prepare for challenges and risks. It is our job to anticipate those risks and challenges and figure out how to mitigate or eliminate them, so consumers are best positioned to participate in the economy and its markets. We do that through multiple avenues, including through our own research and analyses as well as listening to consumers through our complaint system. We know one of the main risks currently emerging is that of Big Tech’s entry into consumer markets, including consumer reporting. While we all know technology can create innovative products that benefit consumers, we also know the dangers technology can foster, like black box algorithms perpetuating digital redlining and discrimination in mortgage underwriting. As such, we must approach innovation from a consumer-centric mindset of cautious optimism.

As you begin your discussions today, I encourage you to consider how we might better respond to the needs of consumers both today and tomorrow.

In order for us to create a more even and equitable recovery from the COVID-19 pandemic, it is crucial that we support small businesses and enforce the Equal Credit Opportunity Act. In an ideal world, small business entrepreneurs who want to use credit to grow their businesses would easily be able to obtain it. But we know that some entrepreneurs struggle to access fair, affordable loans. Accordingly, our first discussion today will be on our NPRM for Section 1071 of the Dodd-Frank Act.

The NPRM we issued is an expansive proposal that seeks to establish the comprehensive database Congress intended when it passed the Dodd-Frank Act and mandated the CFPB to collect small business lending data. The Bureau is committed to ensuring that Section 1071 data is used to satisfy both of the statutory purposes laid out by Congress – those are fair lending enforcement and the identification of business and community development needs and opportunities.

To broaden our understanding of access to small business loans, we proposed to cover a broad range of credit types, including merchant cash advances. We also proposed a handful of discretionary data points, and most importantly among those, is a request for pricing information to give us and others a better understanding of the cost to entrepreneurs of obtaining small business credit. We also proposed to have financial institutions collect both aggregated and disaggregated race and ethnicity information about small business applicants’ principal owners.

As a voice for families and consumers, we welcome your comments to help us ensure that the final rule is best crafted to serve the needs of communities and entrepreneurs, particularly women and those from historically disadvantaged communities. I also encourage you to let us know what we got right and what we got wrong because that helps us balance and calibrate our approach to creating a fair and equitable market. The CFPB welcomes your feedback and your comments on this priority.

Following this first discussion, we will then hear from the Bureau’s Office for Older Americans on age-friendly banking. In a constantly evolving banking and financial environment, we cannot forget that the needs of older adults may differ from those of younger consumers. For example, when older adults are connected with a bank or credit union, age-friendly interventions can help prevent fraud and elder financial exploitation. Older adults, particularly those from underserved racial and ethnic groups and individuals with lower incomes, need financial services and products that are accessible, responsive, and relevant to their lives. Not only are we focused on the needs of older adults, we are also focused on protecting them from financial losses through exploitation and fraud because we know that the interaction with unfamiliar technology can make victimization by nefarious actors easier.

At the same time, we must appreciate that the age of digitization has created new opportunities for innovation among financial institutions and entities to support consumers of all ages. Access to age-friendly online and mobile banking services and other types of financial technology is essential. This has been particularly evident during the pandemic, when it has been difficult or unsafe to visit branches in person. We will continue to monitor innovations and support banks and credit unions in enhancing their ability to serve older consumers who may be digitally disconnected.

As you can see, supporting older consumers is a balancing act between using innovative approaches to meet their banking needs while not allowing bad actors easy access. During today’s discussion, I hope you will share your insights on how we strike the right balance between emerging opportunities and emerging risks.

Our last session today is on appraisal bias in homeownership. Owning a home is a key building block to generating intergenerational wealth, especially within historically disadvantaged communities that have been shut out from fair access to the housing market. Ensuring that the appraisals used to make lending decisions are accurate and free from bias is essential if families of all races and income levels are to prosper and successfully pursue the American dream of homeownership. The Bureau has prioritized resources to evaluate tools and approaches to address property valuation bias. We look forward to working with consumer, civil rights, and advocacy groups; as well as industry and our interagency partners, including all of you here today, to develop solutions that advance fairness in home appraisals. Our ultimate goal is to narrow the racial wealth gap and reinvest in communities throughout the U.S. that have been historically left behind.

All families and consumers face challenges to achieving their American Dream. We must be intentional about creating opportunities that fit the needs of specific communities, families, and individual consumers. I expect that today and in future meetings you can help us develop ways to tear down structural barriers and create markets that are fair and competitive for everyone.

Although I will need to leave at 1:30 pm today; staff will brief me and Director Chopra on the outcome of today’s meeting and apprise us of action items or questions that require a response.

For now, I leave you in the capable hands of CFPB staff and again extend gratitude to you all for taking time from your daily work and your family to provide your insights and feedback on these critical issues.

Thank you.