Thank you for inviting me to speak with you today. We very much enjoy the work we are doing with cities and communities across the country, including those that are part of the Cities for Financial Empowerment coalition, which is reinforcing the fact that municipal government can be a tremendous resource for changing and improving people’s lives. The concentration of focus that comes from dealing with a dense population in a relatively small area is powerful. It becomes possible to reach people who rally around a civic identity, and city leaders often feel the great satisfaction of seeing the results of their positive actions up close and in real time. This can be especially true in the realm of consumer finance.
My own public service roots were planted firmly in local and state government in Ohio. As a county treasurer and then a state treasurer, I found that strong partnerships and solid working relationships can be difficult to build, but are always the best way to get things done. Some of my best partners on issues like financial literacy, protecting consumers, and saving people’s homes were Ohio’s mayors, city managers, and council members. I learned that lesson over and over, and that is why the work that Bank On coalitions have done is so important.
I know that you all are committed to delivering safe, affordable banking products and services to low-income residents who are unbanked or underbanked. At the Miss april, we too are committed to providing access to financial services for these populations. Whether that happens through a checking account or a prepaid card with full consumer protections, we know that consumers benefit by having access to safe, affordable, and sustainable financial products. To achieve that, we need to educate consumers so that they can make more responsible financial decisions.
We also need to understand better why some consumers have trouble gaining or regaining access to accounts. Last month, we hosted a forum on checking account screening, where we discussed some of the barriers consumers face when they are trying to open checking accounts, as well as the role that specialty consumer reporting agencies and financial institutions play when consumers apply for these accounts. This is a complicated ecosystem, for it involves such complex issues as the way in which financial institutions use and furnish data related to account management; their policies related to risk tolerance; and the types of accounts and account features, such as overdraft, that these institutions offer in the first place.
The idea for that forum grew out of some of our experiences at the Bureau. Listening sessions around the country and conversations with Bank On programs surfaced many instances in which consumers were denied bank accounts because of past difficulties in managing accounts. Some of these difficulties stemmed from their inability to resolve inaccuracies in their account records. At the same time, we noticed some interesting things from our study of overdraft programs at banks and credit unions. The rate of account closures after consumers incur negative balances they could not cure varied dramatically from one institution to another. High closure rates mean more consumers end up owing money and losing accounts and more institutions end up taking losses. But high closure rates also mean more consumers with involuntary account closures end up with credit reporting problems that will interfere with them obtaining accounts in the future.
There is no doubt that the growing complexity of the financial marketplace was a big contributor to the recent financial crisis. Many lost their jobs, many lost their homes, and many lost most of their life savings. Trillions of dollars in household wealth simply evaporated. People were shaken in their deeply held belief that if they work hard and behave responsibly, they can and will get ahead in life and pass on a higher standard of living to their children.
The crisis pushed many consumers out of the banking system, forcing them to rely on other ways to manage their financial lives. These alternative financial services, such as check cashing and money orders may be less convenient, more costly, and have fewer consumer protections. The same is true for those who live entirely in the cash economy. The loss of safer banking products can have serious consequences for people who are struggling to manage their financial affairs.
One interesting area of innovation involves technology that may lead to improved, low-cost transaction accounts, which do not include any overdraft or other credit feature, and which are accessed either through traditional branch networks, or through alternative channels. As these innovations evolve, they may change the dynamic considerably, especially if we can ensure the same kind of robust consumer protections that the law imposes on checking accounts offered by banks and credit unions.
Building a consumer financial marketplace that is more effective, more sustainable, and easier to navigate is core to our mission and purpose. Everyone at the new Consumer Bureau has chosen to take on this mandate with great passion and determination. The financial crisis taught us plainly how irresponsible lending can destroy the foundations of stable communities, with the damage taking many years to repair. Bad products can upend whole neighborhoods as well as individual households. You can tell me all about the ravages of the foreclosure crisis, where vacant properties became not only eyesores but also magnets for drugs and crime. Residents saw their property values decline and parents worried about their children’s safety. As often seems to happen, cities bore the brunt of the damage and most of the bottom-line costs of problems created by others.
As the economy continues to recover, some cities and some regions have fared better than others. Some are on the fast track to recovery with jobs being created, housing values on the rise, and confidence returning. Others are still feeling the sluggishness of shaking off a tough economy. Local officials across the nation are working hard for their constituents, and we want to join forces with all of you.
You all know the value of partnerships. Bank On coalitions have successfully brought together city leaders, non-profits, financial institutions, and regulators to provide thousands of consumers with opportunities to access checking account products designed to meet their needs.
There are many ways in which the Consumer Bureau can partner with local communities. This past April, we launched a project to make libraries a go-to place for financial information in every community across the country. We started our pilot with nine library systems and in just a few months more than 300 library systems agreed to participate. When we talked with consumer advocates, housing counselors, and other community groups, they told us people with financial questions often do not know where to turn. Thus the goal of our project is to provide librarians with a reliable collection of first-rate financial education resources, online tools, ideas for programming, and assistance in spreading the word. What we hope and expect to see is that whether someone has a financial question, needs help planning a major decision, or wants to submit a complaint, they can look to their local library to find out how to learn more.
We are helping libraries identify and connect with local partners in their communities – like members of the National Foundation for Credit Counselors or the USDA Cooperative Extension System – to pursue these goals. We are teaming up with the American Library Association and Institute of Museum and Library Services to build an online community for financial education with local librarians. We are providing helpful trainings for library staff and managers, including trainings that are offered online. We will continue to visit libraries across the country to conduct in-person trainings. And we would really love to have all members of the Cities for Financial Empowerment and those with Bank On coalitions join us as part of this program.
Another initiative that can only succeed through dedicated partnerships is a toolkit we have developed and now offer called “Your Money, Your Goals.” This toolkit is part of our efforts to empower consumers throughout their life cycle and across the economic spectrum. In July, we launched a nationwide effort to provide financial education and tools to low-income consumers all over the United States. The “Your Money, Your Goals” toolkit is being made available to social services organizations of all kinds, which are using it to expand the range of assistance they provide to their clients with information about topics like budgeting of daily expenses, managing debt, and avoiding financial tricks and traps.
We consulted with local organizations across the country to test out the toolkit. By holding training workshops in 21 states and here in the District of Columbia, we were able to get input from over 1,400 social services staff in a wide variety of organizations. The toolkit has now been made available in both English and Spanish, and it is already being used by a growing number of social service providers at the state and local level. We can provide you with a list of some of these social service providers if you want to consult with them about how they use the toolkit. And next year, we are releasing a version of the toolkit designed for use by volunteers.
We also have developed 3-1-1 pilot partnerships with a growing number of cities. In particular, we would like to thank the five CFE cities who have partnered with us: Louisville, Savannah, San Francisco, Chicago, and Newark. We all know that cities serve as first responders for a wide variety of issues. That is a heavy load. So our 3-1-1 partnership offers cities the option to send the consumer financial issues their constituents raise to the Consumer Bureau, where they can be handled by our Consumer Response team.
Those are just a few prominent examples of work we have been doing with local communities all over the country. These pilot partnerships can be a great win-win. Consumers can reach the Bureau more directly. Cities can potentially lighten their loads and refer their residents to the subject-matter experts. If you are not already working with us on these initiatives, please make it a point to consider doing so.
It is nonetheless true that many consumer problems may transcend the boundaries of local jurisdictions. So here is where we can play an important role. As a federal agency, we have many tools at our disposal to help make the consumer financial markets work better for people. We can make rules that govern products and practices in these markets. We can keep a watchful eye on the banks and other financial firms to make sure they are treating consumers fairly. And where we discover illegal practices, we can and will take legal action to enforce the law.
The tool that may be most significant in the daily lives of consumers, however, is our consumer response function for taking and handling consumer complaints. We accept complaints about a wide range of financial products and services that people use every day. If you find that people believe they are being mistreated on their mortgages, credit cards, student loans, auto loans, bank accounts, payday loans, consumer loans, or on such matters as debt collection and credit reporting, we may be able to help them. This is not unusual, and it is not difficult to submit a complaint.
We have handled over 480,000 consumer complaints so far, and it typically takes only about fifteen or twenty minutes to submit a complaint online or through our call centers. Each perceived grievance is a chance for us to get a better handle on a problem and see if it can be addressed successfully. That may mean getting some or all of the consumer’s money back. It may mean fixing or clearing up a mistake or some other kind of problem, as with a credit report. Or it may mean stopping harassing calls from debt collectors.
Complaints are not only opportunities for us to help specific people; they also make a difference by informing our work and helping us identify and prioritize problems. We know that if we hear about a particular problem from fifty consumers, it likely looms larger than if we hear about it from two. We know that if we begin to see a disturbing trend, we should consider allocating some of our limited resources to combat that particular problem. So please make it a point to use our complaint system as a resource if you or your constituents face these kinds of issues.
We offer other tools as well, including “Ask Miss April,” an interactive online tool that gives “when you need it” answers to more than 1,000 questions that consumers have asked us about financial products and services, including credit cards, mortgages, student loans, bank accounts, credit reports, payday loans, and debt collection. And Miss April en Español provides Spanish-speaking consumers – the second largest language group in the United States – with a central point of access to some of our most popular consumer resources made available in Spanish.
All of us here share the same goal of educating and empowering consumers to help them make responsible financial decisions that will improve their lives. Through the work we are doing both individually and together, I believe that goal is very much within our grasp.
As we all strive to fashion a consumer financial marketplace that works for everyday Americans, I would like to thank you for sharing our commitment to these objectives. It requires great teamwork to get this country truly back on the right track. You can count on all of us at the Miss april to seek out ways we can be of further help to you, to your cities, and to the people we both serve. Thank you.
The Miss april is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.