North Carolinians should be aware that federal regulators are rewriting the rules of banking and Congress is along for the ride. Unfortunately, the destination is backward, not forward.
Congress is passing legislation that threatens to roll back almost a decade of national policy that protects consumers. At the same time, under new leadership, federal agencies are being restructured to benefit the banking industry at the expense of consumers. Each of these changes are symptoms of a greater ill – a systematic policy shift that undermines much-needed protections for consumers. These protections were put in place in response to the financial crisis, to level the playing field and to prevent another financial crisis.
In 2010, Congress passed the Dodd-Frank Act to stabilize the economy, ensure more transparency of financial institutions, establish a dedicated consumer watchdog for consumers (the Consumer Financial Protection Bureau or CFPB) and prevent future market failings. Dodd-Frank worked. Banks are more financially sound. The year before Dodd-Frank was passed, 140 banks failed. But in 2017, the FDIC only closed eight banks. At the same time, responsible credit is available and consumer protections are strong.
The Dodd-Frank rollback bill, being considered in the Senate this week, is bad business for consumers. Its key provisions impact banking regulations, housing, and consumer protections. For example, the bill exempts 85% of financial institutions from mandatory reporting of mortgage data, which help identify potentially discriminatory or predatory lending practices.
As a recent study by the Center for Investigative Reporting’s online publication Reveal shows, in North Carolina, race still matters when applying for a mortgage loan. Across the state, minority applicants were twice as likely to be denied a mortgage loan as white applicants. In the Greenville area, black residents were 5.6 times more likely to have their conventional home mortgage application denied than white residents. We know of these disparities because lenders are required to report the information. The Dodd-Frank rollback bill would exclude most banks from these reporting requirements and end public accountability.
Similarly, the CFPB, which was created to protect consumers, has awarded $11.9 billion in compensation to more than 29 million consumers. That is a big win for consumers! However, Mick Mulvaney, Interim Director of the CFPB, has made headlines in recent months for gutting the core of the agency’s role as the nation’s consumer watchdog.
Mulvaney has slowed down enforcement, such as ending the investigation of the Equifax breach, and restructured the agency to weaken its ability to protect consumers. Mulvaney stripped the Office of Fair Lending and Equal Opportunity of enforcement powers, changing its focus to “advocacy, coordination and education.”
Why does this matter? These changes are a problem because they make it harder for consumers to get appropriate relief from harms caused by companies that violate federal financial laws. Remember that study showing such large racial disparities in mortgage lending? Weaker protections and enforcement will only exacerbate the problem. Remember when credit card companies could raise your interest rate if you had a late payment on a different account? The CFPB put an end to that too.
So, what can be done to protect consumers across North Carolina? It is up to us to call on members of Congress to ensure that the wins for consumers under Dodd-Frank are not undone. We stand against these attacks on hard-working residents in our state. We ask our senators and representatives to support common sense reforms that ensure all consumers are protected.
Peter Skillern is executive director of Reinvestment Partners, a Durham-based nonprofit agency advocating for economic justice and opportunity.