A New Consumer Protection Agenda for Working Families

09/08/2016 10:54 am ET Updated Sep 09, 2017

For too many Americans it can be expensive just to spend their own money. Daily drains on purchasing power caused by high fees, exorbitant rates and limited access to affordable credit and basic banking services are making it more difficult for millions of Americans to enter the middle class and making the foothold that many have feel tenuous. The very people who can least afford to do so often pay some of the highest rates and fees in the marketplace.

Far from the headlines or cable news, this is an everyday financial crisis that is limiting economic opportunity and dragging down the creation of more good jobs by limiting demand and stifling new business creation. This hidden crisis is keeping the economic recovery from being enjoyed more widely. As a member of the House Committee on Financial Services and a former entrepreneur who helped small and medium sized businesses grow by providing them access to capital, this is unacceptable to me.

While the reforms and protections passed after the financial crisis of 2008 addressed structural problems related to large financial institutions, more work needs to be done to help protect individual consumers and underserved communities. Even here in Maryland, which is one of the wealthiest states in the country, there are areas with high concentrations of consumers who are subjected to costly services and a lack of mainstream banking options.

That's why this year I launched my Consumer Protection and Community Investment Agenda, a package of legislation designed to give consumers access to affordable services, expand protections for vulnerable populations and veterans, and increase economic development in struggling communities.

One of the most important first steps we should take is to broaden access to the basic financial tools that are essential to full and secure participation in our economy. Imagine trying to save for the future or manage your finances without a bank account? For over 60 million Americans that's an everyday reality. These consumers are considered "unbanked" or "underbanked" - meaning they are without a bank account entirely or regularly rely on alternative financial products. A study by the Federal Deposit Insurance Corporation found that 53% of African American households and 46% of Hispanic households do not have full access to banking services. Moreover, unbanked consumers are frequently highly concentrated in low-income areas. This concentration can be particularly devastating in our urban centers. For example, a 2009 study found that in the City of Baltimore over 38% of the population were either unbanked or underbanked.

Without access to affordable financial services many are totally reliant on high-fee alternatives like check cashing services, pre-paid cards and payday lenders. Over time, this can ruin people financially. According to an analysis by the Federal Reserve Bank of St. Louis, unbanked Americans spend roughly 6% of their annual income on fees associated with basic financial services. That means it costs a group that is disproportionally low-income a lot of money just to access their own income. An unbanked worker earning $20,000 will pay $1,200 a year in fees just to spend their own money. While using alternative financial products like check cashing services may work for some consumers, these providers also often benefit from a lack of healthy competition in the underserved areas where they are prevalent.

One solution is to allow philanthropic, non-profit banks to operate in targeted areas with high concentrations of Americans without a bank account, the same areas where it is difficult to find a traditional for-profit bank branch. Without having to worry about making a profit (which will allow lower costs for consumers) and supported by donations, these institutions could offer basic checking, savings and credit services to consumers who right now don't have many options in their neighborhood. Currently, outdated Federal Deposit Insurance Corporation (FDIC) make setting up a philanthropic bank very difficult. Our Equal Access to Banking Act updates FDIC regulations to allow these innovative new endeavors to receive deposit insurance. Instead of spending thousands of dollars on fees, underprivileged Americans with new accounts at a non-profit local bank will have more money to spend on food, clothing and housing. They will also be able to save for the future and have legitimate access to the kinds of affordable credit that are needed to buy an automobile or home.

Many of the same people in these distressed areas are also consumers at rent-to-own companies, which specialize in selling electronic and household goods via contracts that include weekly or monthly payments. While the rent-to-own model may work for some, there is very little regulation of this industry and some rent-to-own contracts can feature high fees and interest rates, leading to customers paying much more - sometimes even as much as five times more - for the same products than if they'd purchased them from a traditional retailer.

Our Expanding Rent-to-Own Protections Act would ensure that rent-to-own customers receive the same level of protections that other consumers enjoy. After the financial crisis, the Consumer Financial Protection Bureau (CFPB) was established with bipartisan support and the CFPB has acted to protect credit card users, payday lending users and other financial products customers. Our bill would require the CFPB to do the same for rent-to-own customers and has been endorsed by the National Consumer Law Center.

Finally, my Consumer Protection and Community Investment Agenda includes bipartisan legislation to protect the credit scores of veterans who are dealing with delayed government payments. The Protecting Veterans Credit Act currently has seven Democratic and five Republican cosponsors and is supported by the Vietnam Veterans of America (VVA), the Veterans of Foreign Wars (VFW), the Iraq and Afghanistan Veterans of America (IAVA), the Military Officers Association of America (MOAA) and the National Patient Advocate Foundation.

The slow disbursement of Veterans Choice Program payments has meant that potentially thousands of veterans have been adversely affected, often having large and inaccurate medical debts wrongly listed in their name. This error can make it more expensive for veterans to buy a home or car or be hired at a new job. No veteran should have their personal finances ruined because of delayed payments from the Department of Veterans Affairs and our bill would protect their credit score.

Our Consumer Protection and Community Investment Agenda is guided by a belief that the financial marketplace should work for all Americans, no matter where they live.