Rev. Jesse Jackson
I am disturbed by the growing number of people in America who don’t have access to traditional financial services. According to the recently-released 2011 FDIC analysis of this financial trend, nearly 17 million American adults have no bank account. That means that 17 million adults must look elsewhere basic financial services. This phenomenon is most prevalent among lower-income, younger households, the unemployed and in communities of color.
Neighborhood financial service providers like pawn stores, payday lenders and check cashing firms, say they must charge fees that reflect the risk of lending to consumers on the margins. As the economy grows, paradoxically so does the number of financially under-served Americans.
The American financial services system is at a crossroads. We must demand changes now or exclude a generation of our families from the financial mainstream.
Too many families are living on the edge of financial insecurity, living from paycheck to paycheck. Americans continue to lose their homes to foreclosure. A single unexpected obligation, an episode of sickness, a death in the family or loss of a job can send too many families spiraling into a cycle of unmanageable debt and economic insecurity. Black families have lost more than a trillion dollars in home equity during the Great Recession.
The financial system is failing too many families. Once community pillars, financial institutions often charge outrageous fees, deny too many qualified borrowers and fail to take into account the real challenges that Americans face.
We need more innovation to keep pace with changing needs. Many banks have abandoned the business of loaning money to individual consumers altogether. Too many will not extend credit to people without significant assets or high credit scores, locking out millions of hardworking Americans from the system. These practices not only harm individual families, but they prolong the recession and make economic recovery more difficult.
Whether it is credit cards, home equity lines of credit, installment or payday loans, working class people need simple, fair, transparent options to meet life’s routine financial challenges. We should not create a stratified system based on class, income, wealth and credit scores. Given reasonable regulation and proper oversight, consumers are capable of choosing the options that best suit their need for credit. Regulation must deter misuse of credit and abuse of consumers.
The Consumer Financial Protection Bureau (CFBP) will play an integral role in creating an equitable, cooperative lending environment because it is the first government agency charged with overseeing both banks and non-bank lenders. The CFBP represents a comprehensive and essential, approach to protecting consumers. As it goes about its important work, it should empower consumers with information and by allowing all lenders to compete for business under the same set of rules, with proper incentives to ensure the flow of credit.
Predatory lending practices are inappropriate, whether it is a $500,000 jumbo mortgage or a $1000 car title loan. Policy makers don’t choose winners and losers – they must protect all consumers. State officials recognize their role in developing measures that protect consumers without taking away their ability to borrow responsibly when they need to. Whether it is called a fee, or interest, loan charges should reflect real lending risk and should not gouge consumers.
It is time to take a fresh look at the challenges faced by America’s disenfranchised consumers and acknowledge that an array of lenders are capable of offering cost-competitive credit services, with straightforward terms and flexible repayment periods. It is axiomatic that interest charges and fees reflect credit risk. But we must build reliable bridges to the mainstream, so that every consumer has an easily accessible path to lower cost financial services that are safe and properly regulated.
We must create more continuity among banks and community lenders. This would allow consumers to more easily move among financial service providers based on their individual financial needs. Working class borrowers could move from higher cost credit products to those with lower rates as they pay off their debts. Bank and non-bank lenders could work together to offer deposit services, check-cashing, money transfers, micro-credit loans and prepaid debit cards along with other secured and unsecured loans. We also applaud experiments that expand the use of alternative credit evaluation tools that might protect lenders without unnecessarily penalizing potential borrowers.
The Rainbow PUSH Coalition believes in personal responsibility and seeks to educate consumers on the science of personal finance. But financial education alone, without a more vigorous dialogue on access to credit will not solve the problem. We must bring financial service providers to our communities, and that starts by bringing them to the table.