President Trump often spoke about “forgotten men and women” on the campaign trail – the people left behind by Washington, whose voices went unheard and questions went unanswered. On Election Day, these “forgotten” Americans sent a clear message: they wanted the government to listen to their economic concerns. This should have been a signal to government officials to start taking the concerns of Americans in rural and disadvantaged communities more seriously.
However, four months into the new administration, many in government are going about their business as usual and have not learned anything from the results of the election. The CFPB is a perfect example – of an agency unwilling or unable to change its agenda even when it goes against everything consumers are telling it.
I have seen firsthand the negative impact that the status quo is having on small and medium-sized businesses across the country, as the President & CEO of the United States Hispanic Chamber of Commerce (USHCC). The USHCC represents more than four million Hispanic-owned businesses across the country that contribute $668 billion to the U.S. economy. Yet despite this, our members consistently seem to be left out of conversations about policies that will directly impact Hispanic communities.
The success of small businesses is dependent on access to capital. Without it, entrepreneurialism is stifled. The Federal Deposit Insurance Commission (FDIC) reports that between 2010 and 2014, the number of small community banks with less than $10 billion in assets declined 14 percent. Without banks available to serve their needs, many of our members depend on non-bank sources of credit, such as small-dollar loans. But instead of looking for ways to expand access to credit, the CFPB is currently considering a rule that would restrict access to credit options even further.
New regulations like those proposed by the CFPB can have a particularly negative effect on members of my association and our communities. They often mean increased compliance costs for small businesses or, especially when it comes to financial regulations, raise the bar for consumers to access funds or credit used to patronize my members’ small businesses.
This latest rule is no different. The CFPB has not considered the impact that its proposed rule will have on Hispanic communities across the country. Its actions will have a trickle-down effect, impacting not just individuals but small businesses. The CFPB’s own estimates suggest that its proposal would reduce small-dollar lending storefronts by 66 percent. If those stores are forced to close, it would cut off one of the only sources of credit available within many communities and put thousands of people out of work.
What’s more, people who use small-dollar loans during financial shortfalls value having that option available to them and are satisfied with their experience. The CFPB’s consumer complaint portal provides an outlet to tell the CFPB when they encounter problems with financial products, and hundreds of thousands of people have done so. The CFPB, in theory, uses these complaints as the “compass” that directs its enforcement and rulemaking actions. Its small-dollar lending rule, however, targets a product that receives only 1.5 percent of all complaints and effectively eliminates a product that millions of people depend upon.
During the comment period for this small-dollar lending rule, my organization spoke on behalf of our millions of members and told the CFPB that its proposal would not only restrict access to credit across the country, but would have a disproportionate impact on minority communities. In addition, over one million customers who use small-dollar loans to manage unexpected or emergency expenses submitted comments as well, telling their personal stories of how access to this product helped them through difficult times. Despite this, the CFPB has continued with its rulemaking and does not appear to have taken our very serious concerns into consideration.
The election results show that there are very real consequences when Washington ignores the voices of American consumers. Small business owners and consumers alike have made it clear that the CFPB’s proposed rule will restrict access to small-dollar loans and have very real consequences for the most dynamic entrepreneurial segment of the American economy. The CFPB still has time to take this into account and change its rule. The “forgotten” Americans are telling the CFPB what they need. The question that remains is whether the CFPB will listen.