On the evening of October 26 Raj Date, Special Advisor to the Secretary of the Treasury for the CFPB, visited Minneapolis for one in a series of town hall meetings. The CFPB website had advertized for the events saying, “We’re on a mission. We’re criss-crossing the country to hear from consumers about their experiences with financial products and services.”
The meeting room at the Minneapolis Public Library was filled with about 100 people. They came from various walks of life — some were students, others were bankers, lawyers, community organizers, and state legislators, some were home owners and a few had come from the Occupy Minneapolis camp in downtown.
The meeting began with a panel discussion involving four presenters. The first was Julie Gugin from the Minnesota Home Ownership Center who was asked to share her thoughts as a home owner’s counselor. Gugin began by saying that in her experience there are many examples of problematic lending activities in the marketplace. She is seeing more home owners go through foreclosures because of job loss or under-employment. Gugin said she finds that lenders are hard to work with and even engage in predatory relief activities like asking a customer to pay $20,000 to keep their home. Gugin said the objective of her organization is to make sure home buyers have basic information and understand the pitfalls of loans and home ownership before signing on the dotted line.
David Mcgee with Build Wealth Minnesota reported that his organization is learning that families are affected by student loan debt. His experience suggests that student loan products are so available in the marketplace that people use them for things besides school costs. In addition, families have too much access to non-traditional high-cost financial products that eat up all their income. He has found the lack of income has, in turn, caused the consumer to use those same products even more. The consumer becomes trapped in a downward spiral. Mcgee shared Gugin’s conviction that education in financial products and family finances is of primary importance.
Amanda Bardonner from the Minnesota State University Student Association shared that students face an average $27,000 in student loan debt at graduation, and 85 percent of students are using a credit card to purchase necessities or pay tuition. At graduation those who use credit cards have, on average, $4,700 in credit card debt. According to Bardonner, students take out private loans because they are ineligible for government student loans or because they don’t know the system or don’t want to fill out a FAFSA form. In her opinion, students are placed in a difficult position because they cannot purchase a home or invest in the economy after graduation. Bardonner echoed the need to educate students on debt and ensure students are not victimized by private lenders.
Prentiss Cox, a University of Minnesota professor, emphasized the need to protect consumers from the downward negative cycles that can come with certain types of financial products. He cited payday lenders and credit card companies as the main offenders in drawing consumers and students into these debt tailspins. Zixta Martinez, deputy director of public affairs for the CFPB, added that the consumer should not have to decode a 21-page disclosure that would take several PhD’s to decipher. The CFPB would like to see more transparency in the disclosures of the products being sold.
One of the functions of the CFPB is to solicit consumer stories about abusive financial practices. In keeping with this mission, the second half of the meeting was an open microphone session. The main points emphasized in the session followed the themes of the panel. We heard from a consumer rights lawyer who commented that the private student loan industry is seen as a “cash cow” by student loan lenders. He sees these lender practices as turning students into indentured servants because the banks know that even if there are no jobs for students, the student loans cannot be discharged in bankruptcy court.
The attorney was followed by a recent law school graduate who considers himself lucky to only have $120,000 in student loan debt. He has paid off two loans and still pays $600 per month. He asked that the CFPB do what they can to make sure that student lenders be obligated to disclose the actual risks of their loans.
A woman shared that she has $2,000 in credit card debt and $30,000 in student loans. She expressed that she feels targeted by the credit card company because they offered credit card products to students.
One speaker’s frustration encapsulated the views of many who commented on the mortgage industry. He asked that the CFPB pressure banks to be more cooperative, to stop foreclosures and allow restructures.
Another woman who had a ‘pick a payment’ loan stepped up and said that the panel’s talk about financial education for the consumer is hollow. If the education consumers receive only enforces the system that allows ‘pick a payment’ loans then that system will only continue to victimize consumers, she said. She suggests rearranging the system so that the consumer can benefit from it. She said she does not foresee any financial institutions being held accountable in the newly regulated environment.
A representative of Occupy Minneapolis made some unexpected remarks. He thanked the CFPB for its efforts but said that it is just another bureaucracy that is policing the banking industry. He suggested that instead of making another federal entity we make a paradigm shift and educate the people. He saw this as the only sustainable solution to overcoming the errors of our financial system.