TOLF Public Comment on Proposed Rules for Regulation E by CFPB
In November 2014, the Consumer Financial Protection Bureau (CFPB) held a series of private community roundtable meetings in different cities with CFPB Director, Richard Cordray and invited community organizations. The meetings were to discuss consumer finance issues, such as payday lending, prepaid cards, debt collection, credit reporting, student loans, mortgages and foreclosures and their effect on Americans on a daily basis and to announced proposed rule changes to Regulation E with regard to prepaid cards. During the meeting I attended in Wilmington, DE there was a lot of discussion and sharing of experiences from six community organizations from Baltimore, MD, Delaware and Philadelphia, PA who attended, related to all these topics. The re-occurring theme from that portion of the meeting was there needs to be more clarity of rules and regulations for the consumer, better enforcement of rules as they pertain to products used by consumers and harsher, swifter punishment for companies who repeatedly skirt and break the rules. As the lone representative from Pennsylvania, I shared on behalf of The One Less Foundation and Philadelphia, the impact of payday lenders on unbanked and underbanked communities, the need for more education of the public as tho how payday and title loans work, the pressing need for a public (searchable) database of lenders, so consumers can see if complaints have been filed against companies they may potentially do business with. I also told a few stories of the impact of identity theft on children in foster care. I stressed the need to protect children in foster care from agency employees, foster parents and birth families who use their identities to obtain credit in the child's name and by the time that child is 18, they already have ruined credit before they are able to begin their adult life. During the public session, in which Director Cordray, outlined the proposed rules for Regulation E, the floor was turned over to those who had signed up to make a comment. Below is the comment from The One Less Foundation: "The typical customer of pre-paid products is a working adult who generally earns enough income to survive; yet not enough to cover emergencies and/or does not maintain high enough balances to maintain banking accounts at traditional financial institutions. As Director Corday stated in his earlier remarks 'they should not be treated as second class citizens'. Many of the individuals my organization works with currently use pre-paid products as the sole means of participation in financial transactions. Those new rules are needed and are a step in the right direction. I echo the sentiments of my colleagues who spoke before me with regards to the concerns of credit products being attached to pre-paid products without the already vulnerable consumer understanding the risks involved, and the inherent confusion when mixing pre-payment with extended unsecured credit. Pre-paid products do serve a purpose, which allows those outside the mainstream financial system to conduct transactions which are needed, if not required to live in the U.S. We need better regulation of these products so that users are not trapped in cycles of inescapable debt and poverty. We welcome and look forward to the enforcement of the proposed rules in Regulation E." We have a lot of work to do to educate Americans on the use of pre-paid products and financial products as a whole. Part of the work that needs to be done, is to make sure they are not taken advantage of by business practices that do more harm than they ever would do good. The work we do at The One Less Foundation seeks to ensure that all Philadelphians, both youth and adult, understand the financial products and services that are available to them, have enough knowledge to choose which products and services are in their best short and long-term interests to use and that they are able to demonstrate responsible use of these products. Along with the work we do, it's important for government agencies which have authority to oversee these products and the companies that offer them, to enforce the rules that they impose.