Early this morning, lawmakers finalized the banking reform bill. The "Restoring American Financial Stability Act of 2010" is a great victory for consumers, who will now have vastly improved protections against predatory lending. The bill also contains very strong and much-needed foreclosure assistance. This is an historic piece of legislation that will change financial markets for the better.
The one unfortunate blemish was Congress caving to the will of auto dealers and exempting them from new federal oversight. In a momentary lapse back into politics as usual, lawmakers shielded a loosely regulated industry from accountability. This occurred over strenuous objections from President Obama, the Pentagon, independent community banks, civil and consumer rights organizations, Congressman Gutierrez (D-IL), and many others who know all too well how auto dealers have exploited Latinos and other consumers seeking to finance their car purchases. Communities of color are most frequently targeted by abusive lenders in the auto industry and the National Council of La Raza (NCLR) pledges to work with regulators, consumer advocates, and the industry to end discrimination and exploitation in auto dealer financing.
That said, on balance, there is much to celebrate about this legislation. We congratulate our champions on several major victories:
Consumer Financial Protection Bureau (CFPB)
The creation of a CFPB is unprecedented. This bureau will be entirely devoted to protecting families from predatory loans and other unsound financial products. It will be autonomous and have the authority to write and enforce rules. This is the cornerstone of true consumer rights.
Money Transfers
New disclosures included in the legislation will create a more transparent process for wiring money abroad. Tens of billions of U.S. dollars are sent every year by American residents to their relatives overseas. In fact, immigrants from Mexico alone sent over $17.3 billion home in 2009. These same remitters also spent an estimated $948 million in fees and other costs getting it there.
New protections championed by Congressman Gutierrez and Senator Akaka (D-HI) will create a disclosure that displays the true cost of the remittance and the value received.
Foreclosure Assistance
Two provisions stand as real boosts for those struggling with foreclosure, as experts estimate that more than 2.3 million Black and Latino households will lose their homes to foreclosure between 2009 and 2012 and approximately two million Blacks and Latinos have lost their jobs since the recession began. The first includes a bridge loan program for unemployed homeowners while they look for a job. The second is an infusion of funding for a Neighborhood Stabilization Program (NSP) that allows states to purchase and redevelop foreclosed homes. A solid NSP can also help generate employment in hard-hit areas.
Mortgage Protection
Reckless and deceptive lending has severely impacted Latinos and other communities of color. For example, Latinos are 30% more likely than Whites to receive a high-cost loan when purchasing their home. They are also more likely to receive loans with high-risk features. The bill includes comprehensive mortgage reform and antipredatory lending measures essential to combating abusive lending practices that played a key role in the economic crisis.
Financial Counseling
Funds will be infused into community-based organizations that offer financial counseling. They will help families open bank accounts, build credit, identify an affordable car loan or credit card, and recover from a foreclosure or bankruptcy. This service is critical to helping consumers recover and avoid disastrous products in the future.
Safe Bank Accounts
Low-income, minority, and underbanked families will have access to safe and affordable bank accounts. Currently, many Latino consumers rely on fringe financial products such as payday and car title loans to pay their bills and otherwise make ends meet. Approximately 19.3% of Latinos and 21.7% of Blacks are unbanked, compared to only 3.3% of Whites. The bill will provide grants to help families connect to bank accounts and provide alternatives to payday loans.