While some members of the Consumer Rights Coalition have told me they are confident Congress’ financial regulatory reform legislation is a step in the right direction, many remain concerned about how it will impact their access to credit. We are not referring to accessing credit for vacations, concert tickets, or a new dress to wear on date night; we are talking about accessing credit for a medical emergency, college books, or to pay a utility bill when we’re experiencing a shortfall in our budgets.
Our members use a variety of non-bank financial products to manage their households and many are nervous that a Consumer Financial Protection Bureau, part of the current regulatory reform bill, will regulate these services out of business, rather than make them better.
According to a recent FDIC survey, 21 million American households (about 43 million adults) have bank accounts but rely on non-bank financial services by choice. They are defined as “the underbanked.” Certain racial and ethnic minorities are more likely to be underbanked than the general population, including blacks, American Indians/Alaskans and Hispanics.
Rather than only focusing on protecting those who already have access to a variety of financial services, the new Consumer Financial Protection Bureau should also address the needs of our members and the millions of other underbanked Americans to access realistic and affordable financial products.
As long as the need for quick, convenient loans exists, non-banks should be able to continue to offer the financial services that the traditional banks will not. When an emergency arises and we need a short term, small dollar loan, it doesn’t make sense to be forced into longer term, higher dollar solutions provided by traditional banks. Long- term debt is the last thing we need while already struggling to meet our household responsibilities.
How can we bring “non-bank” financial products into the regulated financial system and how can we help people who use non-banks as a short-term solution build their credit histories so they can eventually graduate to a traditional bank? We need to make sure the new Consumer Federal Protection Bureau addresses these questions.