The Consumer Financial Protection Bureau (CFPB) should explicitly re-center its antidiscrimination mandate and address itself squarely to fostering racial and economic equity.
By doing this, CFPB leadership could realize the full Dodd-Frank Act mandate to listen and be responsive to traditionally underserved communities and consumers.
The agency needs to center the voices of marginalized communities as a necessary adjunct to promoting accountability under the statute. The recognition that racial and economic justice are linked and that the pandemic is amplifying and embedding existing racial disparities, demand that we move beyond the generalities of the statutory language. Poor, rural, and immigrant communities, across racial differences, are all both underserved and poorly served by financial institutions. Black people in particular have always been excluded from the financial mainstream in this country.
I am the founder of the Consumer Rights Regulatory Engagement and Advocacy Project (CRREA Project), and in our series on how the CFPB develops policy, and the inclusion of marginalized communities’ perspectives in that policy development, we’ve talked about the vision as set forth in Dodd-Frank, the reality of how the statutory structure was implemented, and changes to the organizational chart under the Trump administration.
Here are our recommendations for how the agency can focus on racial and economic equity:
Name it: Identify who is served by the CFPB’s mission
As a first step to rededicating itself to its statutory mission, the CFPB should take a public stance acknowledging the centrality of consumers and traditionally underserved consumers. We should put behind us the fight over the name of the CFPB, and whether “consumer” or “bureau” should come first. Regardless of how often the statute put which one first, Congress was clearly focused on a certain set of concerns in the creation of the CFPB: consumer concerns and particularly those of traditionally underserved communities and consumers. Consumer interests always come first in the Dodd-Frank Act, and so they should in how the CFPB understands its work and presents it to the public, whether through the website, the logo, or consumer education materials.
The CFPB’s current strategic plan runs through 2022. In developing the new strategic plan, the CFPB will have the opportunity to revisit its mission and vision statements, as well as the overall goals for its work, including specific measurable goals to be reported on annually. The CFPB should seize this opportunity to center consumers, and a recognition of the CFPB’s special responsibility to traditionally underserved communities, in its work.
Lay the foundation: Regularize public-facing research on consumer financial products and services and traditionally underserved communities
The Office of Research is the first of the statutorily mandated Dodd-Frank Act offices. Its mandate includes research and reports on risks to consumers, access to credit for traditionally underserved communities, and the experiences of traditionally underserved consumers. It has both world-class economists and access to data sets covering all consumer financial markets, in many cases with only a month’s lag time. The CFPB also has the authority, in section 1022(c)(4) of the Dodd-Frank Act, to collect additional information from financial institutions.
Those resources should be focused on foundational work on the role of consumer financial products and services in traditionally underserved communities. When is disclosure effective and for what risks? How do consumers view tradeoffs in access to credit versus risk? How can we untangle when the benefits of credit to traditionally underserved communities outweigh the costs of credit? For example, the subprime lending boom of the early 2000s promoted access to credit and led directly to both the foreclosure crisis and the loss of more than a generation of wealth accumulation for Blacks and Latinx. Credit can open doors and it can close them.
The Office of Research has done significant work in all of these areas and more. The CFPB should follow the precepts of the bipartisan Foundations for Evidence-Based Policymaking Act and adopt a public “learning agenda.” A public research agenda, coupled with a regular cadence of reports on issues of importance to traditionally underserved communities, could bring public accountability to this aspect of the CFPB’s statutory mandate. For example, researchers look to the CFPB for its annual release of the HMDA data and accompanying reports analyzing that year’s data. Changes to the user interface for accessing the data have brought congressional scrutiny. The CFPB could also expand its discussion in its semiannual report to Congress of the “significant problems faced by consumers in shopping for or obtaining consumer financial products or services.” That discussion could explicitly center the experiences of marginalized communities in accessing credit on fair and nondiscriminatory terms.
Build it: Create a structure that reflects the statute and makes visible traditionally underserved communities
The Trump-era CFPB organizational chart has moved four of the Dodd-Frank-mandated offices and special units off the public-facing organizational chart. The offices of Community Affairs, Financial Education, Servicemember Affairs, and Older Americans are now all housed inside the Consumer Education Office, itself housed inside the new Consumer Education and External Affairs Division. Offices important enough for Congress to name are important enough to be visible on the public-facing organizational chart. The public should know who leads those offices.
Any new leadership of the CFPB will have to consider the location of the Office of Fair Lending. The move of the Fair Lending Office from its initial home in the same division with Supervision and Enforcement to the Director’s Front Office was meant to refocus the Fair Lending Office’s work on “advocacy, coordination, and education” instead of supervision and enforcement. We at CRREA Project believe that leaving the Office of Fair Lending in the Director’s Office could be used to signal its crosscutting importance to the work of the CFPB, if coupled with the necessary formal and transparent decision rights and processes.
For example, the CFPB could publicly commit to a formal role for the Office of Fair Lending in priority-setting across the agency. The CFPB could update its written procedures related to decision-making to embark on specific actions that would normally rise to the Director for final decision, such as authorizing specific enforcement actions. Establishing formal and transparent decision rights and processes would provide accountability to Congress and the public. Such actions could provide reassurance that fair lending was a central consideration in supervisory and enforcement actions without disclosing confidential internal CFPB deliberations.
Other steps could include explicit roles for outreach connected to rulemakings to facilitate input from marginalized communities or a designated role for the statutory offices in providing input into policymaking. Clarifying the role of the Community Advisory Board would assist both the CAB and staff in understanding the purpose and nature of their interactions. Other agencies, such as the Environmental Protection Agency have, from time to time, published detailed guidance for staff and guidance for rulewriters about the agency’s policy decision processes. This kind of work is foundational to consistent management across administrations and could contribute to the development of a culture and identity for the CFPB that lasts for generations.
Accountability to the underserved and poorly served consumers and communities the statute repeatedly calls out is critical. Public-facing documents, like the strategic plan, a research agenda, or an organizational chart, afford one level of accountability. They explain what the agency intends to do and offer a point of engagement for the public. Future leadership should go further and embrace the statute’s emphasis on consumers and traditionally underserved consumers and communities to apply an explicit racial and economic equity lens to decision-making across the agency. Doing so would build a CFPB robust and resilient enough to serve the public well for the years to come.