I congratulate Ylan Q. Mui of the Washington Post for writing an article about how blacks have been devastated by the Great Recession, with their wealth destroyed, their jobs up and gone, and their credit ratings in the crapper. I was a little apprehensive as I began reading the piece. It seemed like it might be a call for restarting the sub-prime predatory lending market as a way of overcoming systemically low credit ratings in the black community. But that line of reasoning never really materialized, and the reporting turned out to be quite good.
Ms. Ylan focused on the bad news, and credit ratings in particular, but there is some relief. In 2014, everyone in the black community will have the opportunity to gain access to health insurance, whether or not they can pay for it out of their own pockets. No longer will families be ruined because they can’t afford treatment for diabetes or cancer. The insurance companies can’t drop coverage capriciously, nor can they impose lifetime caps in coverage or deny coverage for those who lost their jobs but have pre-existing illnesses.
Meanwhile, the Justice Department is aggressively pursuing settlements with the major lending banks who systemically defrauded blacks and Latinos by giving them less favorable loan terms.
A month ago, the Justice Department reached a $21 million settlement with SunTrust over what it called a “racial surtax” on home loans. For instance, it said black borrowers in Atlanta were charged $745 more in fees than white borrowers with similar credit histories and qualifications.
“SunTrust’s African American and Latino borrowers had no idea they could have gotten a better deal, no idea that white borrowers with similar credit would pay less,” Assistant Attorney General Thomas Perez said. “That is discrimination with a smile.”
The Justice Department also reached a $335 million settlement with Bank of America over similar charges last year and is investigating Wells Fargo. The banks have denied wrongdoing.
This is in tandem with the newly created Consumer Financial Protection Bureau’s efforts to crack down on a variety of groups that prey on the black and Latino communities, including pawn shops, check-cashing services, and issuers of pre-paid debit cards, car title loans, and rent-to-own schemes.
The challenge is to find a way for people who need to credit to get it without being ripped off. That’s a mission that is complicated by the Republican Party’s relentless efforts to shield these non-bank lenders from regulation.
House Bill 1909, sponsored by California Representative Joe Baca (CA-43), would create a new federal charter for non-bank financial service providers to bypass CFPB. It would also preempt state consumer protection laws and rollback consumer gains nationwide. Already several states across the country have passed strong consumer protections against the very same lenders this federal legislation would reverse. If enacted, non-bank lenders would no longer be subject to the federal Truth in Lending Act. Currently TILA requires disclosure of the cost of credit as an annual percentage rate (APR).
There’s no chance that the Obama administration will sign Joe Baca’s law, but you can be sure that Mitt Romney would. Romney would also chip away at the Credit Cardholders’ Bill of Rights that was passed in 2009.
So far, Obama’s most progressive legacy has been the area of consumer protection, which benefits almost everyone, but disproportionately benefits those at the bottom of the economic ladder who are not savvy in financial matters and who are often desperate to obtain money on almost any terms.
The right has been very focused in their effort to blame the housing bubble and ensuing financial meltdown on blacks and Latinos who borrowed money they couldn’t pay back. They ignore the fact that lenders devised ways to lend money to unqualified borrowers on fraudulently and discriminatorily unfavorable terms. They ignore the fact that whole industries grew up based on exploiting the needy’s desire to stay afloat just one week longer.
Obama cannot single-handedly restore all the destroyed wealth in the black community, but he can make sure the black community is better protected from usury and fraud, and that they can have access to needed medical care without having to file for bankruptcy. In fact, he’s already set those protections in motion. All he needs is a second term to see those protections through.
