The Consumer Financial Protection Bureau (CFPB) officially opened for business this week.
At last week’s White House Hispanic Policy Conference, we had several fascinating conversations with Latino leaders about what the CFPB means for Latino families in particular.
For the first time, all Americans will have an agency with the primary mission to look out for consumers in the financial marketplace. The CFPB, created by last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act, will be a cop on the beat to enforce the laws on credit cards, mortgages, student loans, payday loans, and other kinds of financial products and services.
The CFPB envisions a consumer financial marketplace where markets work for consumers, responsible providers, and the economy as a whole. In this vision, no one will be able to build a business model around unfair, deceptive, or abusive practices. With increased transparency, consumers will be able to answer two basic questions about any financial product or service: Can I afford it, and is this the best deal I can get?
Latino families will be empowered to take better control of their finances with a consumer protection agency in place. Beginning in 2007, when the United States faced the most severe financial crisis since the Great Depression, Latinos were especially hard hit.
The CFPB will work to ensure that all American consumers, including Latinos, are protected. Following are just a few of the ways the CFPB will benefit Latinos in its mission to protect all American consumers:
Encouraging Fair Lending: Through the Office of Fair Lending and Equal Opportunity, the CFPB will conduct oversight of both bank and nonbank lenders to enforce laws that protect Latinos from discriminatory lending practices.
Simplifying Mortgage Disclosures: The CFPB will also help families understand the costs and risks of products so that they can choose the ones that best meet their needs. The CFPB’s “Know Before You Owe” project will result in a simplified two-page disclosure form about the cost of a mortgage, which will be available in both English and Spanish. The process to develop the disclosure form is as groundbreaking as the eventual product will be: a public design effort that includes online public input, consumer testing in six cities, and “co-development” of the Spanish-language form to ensure that concepts in the form are familiar to Spanish speakers.
Supervising Alternative Financial Services Providers: Many Latinos depend on financial services outside of the traditional banking system. The CFPB will be the first federal agency to supervise alternative financial services companies, such as nonbank mortgage companies, private student lenders, and payday lenders. The CFPB is currently inviting public input on which other nonbank markets to include under its nonbank supervision program, and how to define the “larger participants” in these markets that will be subject to CFPB supervision. Markets for possible coverage that have significant reach into Latino communities include check cashing, prepaid cards, money transmitting, debt collection, debt relief services, consumer reporting, and consumer credit and related activities.
Remittance Transfers: For many Latinos, electronic international money transfers, or remittance transfers, can be a vital link to family members abroad. The CFPB has just released a report that recommends principles for disclosing exchange rate information to consumers using remittance transfer services. The report also examines the potential for using remittance history in credit scores.
Monitoring Private Student Loans: Many Latinos depend on loans to pursue higher education opportunities. The CFPB will supervise private student lenders, enforce the laws against unfair student lending practices, and require lenders to follow the rules of the road and give students the information they need to make smart choices about student loans.
Enhancing Financial Education: The CFPB will enable consumers to achieve better outcomes through effective financial education. Through the Division of Consumer Education and Engagement, the CFPB will offer the information necessary to make smart financial choices. Many of these educational materials will be offered in Spanish.
Protecting Servicemembers: Latinos who serve in our armed forces should never be preyed upon by unscrupulous lenders, especially while they are deployed. Under the leadership of Holly Petraeus, Assistant Director for Servicemember Affairs, the CFPB recently announced an agreement with the military’s Judge Advocate Generals (JAGs) to provide strong consumer financial protections for servicemembers and their families.
Responding to Consumer Complaints: The CFPB has set up a system to receive consumer complaints about financial products and services, beginning with credit cards. The toll-free number will offer assistance in English, Spanish, and additional languages.
These are just a few of the ways the CFPB will benefit Latino families, and all American consumers, as the CFPB opens for business. For more information, please visit www.consumerfinance.gov.
Stephanie Valencia is Associate Director of the White House Office of Public Engagement and handles Latino Outreach