Consumer protection groups have grown increasingly concerned about Republican promises to cut back on financial regulations next year. The roll back in regulations could pose a risk for minority communities who have historically been subject to discriminatory practices by mortgage, auto, and pay day lenders. Republicans in Congress are targeting the Consumer Financial Protection Bureau (CFPB), the watchdog agency responsible for regulating the largest banks. The agency has been successful, forcing the biggest banks to return $12 billion to 27 million American consumers for unnecessary charges and fees.
The CFPB was created in 2010, following the passage of the Wall Street reform bill, spearheaded by Elizabeth Warren and Democrats in Congress. Since then, Republicans have been trying to weaken the agency by altering it’s independent funding structure and place it under the control of Congress. This would make it the only regulatory agency whose funding would be controlled by Congress. Conservatives also want to turn the leadership structure from one director, to a five person bi-partisan commission, rendering any decision making prone to partisan gridlock. Then there are Republicans that want to dismantle the agency all together.
In spite of the repeated threats, The CFPB worked to mitigate some of the worst banking practices that target minority communities. The CFPB found the practice of redlining still exists, where African-Americans are excluded from receiving loans that their white counterparts, with similar circumstances, could receive. Auto loan companies have been forced to change their lending standards considering discriminatory practices that found African-Americans were receiving loans at rates much higher than their white counterparts.
The CFPB has been busy working to create rules to regulate pay day lenders. These loans serve as debt traps for those who live pay check to pay check, particularly in communities of color. Often consumers are trapped in borrowing cycles that require them to take out more than 10 loans from payday lenders at interest rates as high as 400 percent. The rules created by the CFPB would limit these practices and give those in low income communities opportunities to get ahead and become financially stable.
Consumer groups like U.S PIRG have been organizing on the front lines of this fight. Immediately after the election U.S PIRG launched their “Defend the CFPB” campaign. The targets are Democrats and Republicans that seek to eliminate or alter the funding and leadership structure of the CFPB. If the CFPB were to be eliminated by Republicans, minorities in low income neighborhoods would be the first to feel the wrath of discriminatory rules and predatory lending.