Consumer protection can prevent ‘triple whammy’ for people of color

OPINION - The impact of deregulation, unethical fees hidden in fine print, and illegal discrimination contributed to a loss of wealth totaling more than $200 billion for people of color...

This week, Congress will consider its most substantial effort in decades toward financial regulatory reform and consumer protection. Unfortunately, many of us are confused by what appears to be divergent financial forecasts. Some of us are trying to figure out whether we should celebrate the fact that there has been an increase in home resales, which jumped 6.8 percent in March; or whether we should lament the fact that foreclosures rose by 35 percent since the beginning of 2009, largely as a result of banks finally working through their backlog of troubled homeowners. Others still are just desperately trying to get to the nearest payday loan center, where they can borrow their way into a deeper spiral of debt, at 1000 percent interest.

Let’s clear up the confusion. Consumer financial regulatory reform is about protecting the public from a recurrence of assault on human dignity such as that which we just witnessed, where predatory lending thrived and race or ethnicity resurfaced as a factor in determining loan products and interest rates. For example, in the last decade, African-Americans were up to 34 percent more likely to receive higher rate and subprime loans with a prepayment penalty than their similarly situated white counterparts (i.e. income and credit scores were equal). Many people, disproportionately people of color, were directed toward subprime loans even if they qualified for a prime loan. Then, as the fiscal climate worsened, so too did their employment circumstances.

For most of America—or “Main Street” as people like to call it—financial regulatory reform is about eliminating unfair and exploitative practices that undermine economic stability. For most, it is less about derivatives and more about keeping their credit card rates from skyrocketing. It is less about proprietary trading and more about keeping a home that represents an entire life’s investment.

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Recently, ten cities were noted as facing a “double whammy” of high unemployment and loss of home equity and other assets. In six of these ten cities, African-Americans and Latinos comprise as least a quarter of the population, and are disproportionately affected by loss of employment and wealth. The impact of deregulation, unethical fees hidden in fine print, and illegal discrimination contributed to a loss of wealth totaling more than $200 billion for people of color. Without reform, consumer protection, financial literacy and credit repair, many of our communities are poised for a “triple whammy” of increased unemployment, loss of equity, and increased discrimination. We certainly don’t need more of that.

The economic security of our nation depends on the practice of a fair and just democracy. A consumer financial protection agency, which is crucial to the reform efforts being debated, would help to enforce fair lending laws; provide for “robust federal supervision” over alternative financial services such as payday lenders and check cashing centers; and increase overall financial institutions’ accountability to the public. The coupling of increased regulation with consumer protection can revive not only the integrity of our economy, but also our collective commitment to equal opportunity.