Policy goals: End the Dual Financial System
End Predatory Financial Products and Services
“If you’re making that profit by trapping hardworking Americans into a vicious cycle of debt, you’ve got to find a new business model.”
In order to end the dual financial system, our government must ban all predatory financial products and services. Predatory practices, products, and services thrive because financial services have decided to exclude many of consumers of color, rendering them without access to safe, secure, and affordable products and services. The list of these predatory products and services includes:
- predatory loans (e.g., vehicle, payday, car title, pawn shop, rent-to-own, higher education, and mortgage)
- predatory account fees (e.g., overdraft fees, minimum deposit fees, and minimum balance fees)
- predatory debt collection practices that exploit the financially vulnerable
- predatory prepaid cards
- discriminatory insurance practices
These services have exorbitantly high interest rates, fees, and terms that make repayment difficult. In fact, most payday and car title loans are designed to be rolled over multiple times, with fees and interest (triple digit interest rates) being collected with each rollover. These predatory products and services are actively marketed to Black and Latinx people. For example, there are more storefront payday locations than there are McDonald’s restaurants, and the vast majority are located in Black and Brown communities. Also, researchers have documented that large commercial banks marketed subprime mortgage products to Black and Brown borrowers, even when they would have qualified for a traditional mortgage. All predatory products and services must be banned! Help us identify the right policies that will put us on that path. Here are some ideas we have identified so far:
policies for consideration:
- Ban payday and car title loans.
- Cap interest rates on other small dollar loans at 36% APR (annual percentage rate).
- Apply an Ability to Repay Standard for all forms of lending to ensure that lenders only offer loans to those they have determined have the means to repay.
- Protect and expand the power of the CFPB to regulate financial product and fair lending laws.