Financial System Policy Reforms: →
Localities, states and the federal governments should support and replicate promising local innovations that do the following:
Expand access to financial capability supports
A financial system built on improving financial security would help families build the skills to do a household budget, establish long-term goals, and effectively navigate choices among financial products and services. Access to these skills would be woven into education, social service and workforce programs. Early childhood programs, for example, would help parents learn how to budget, build or improve their credit score, access appropriate products and services, manage their debt and begin a college savings plan for their child. School curricula, starting at the elementary level, would include financial education to help youth develop financial skills relevant to their lives.
Help build credit scores
A financial system built on improving financial security would offer creative and innovative ways for lower-income families to establish and repair credit, a key access point to the financial mainstream. For example, the national Credit Builders Alliance (CBA) recently completed a pilot project that uses rental payments to support low-income renters to build credit and financial capability. Rent reporting involves monthly reporting of rental payments to at least one of the major consumer credit bureaus for inclusion on traditional consumer credit reports. CBA supported eight affordable housing providers in becoming credentialed with Experian Rent Bureau to begin and sustain rental payment reporting on behalf of 1,255 low-income residents. Pilot project sites included affordable housing developments in Boston, Baltimore, Cleveland, Houston, Oakland, the Chicago suburbs, and communities in central Oregon and rural New Hampshire.
Increase access to affordable financial products for vulnerable households
Community Development Credit Unions (CDCUs) embody elements of an equitable financial system. They were specifically designed to serve low- and moderate-income communities and have pioneered efforts to deliver financial products and services to constituencies marginalized from the mainstream banking system. In addition, a variety of initiatives are working to support and encourage mainstream banks to offer appropriate products and services to lower-income households and households of color. One such initiative, “Bank on San Francisco” was started by the Treasurer of the City/County of San Francisco in 2006 and then replicated in cities across the country. The initiative partnered with both credit unions and local and national banks to increase access to bank accounts for people left out of the banking system.
Congress should maintain the integrity of the Dodd-Frank consumer protections that regulate lenders and reject legislative attempts to weaken or dilute its provisions.
The federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 enhances financial security by creating new oversight authority and setting rules that prevent lenders from peddling deceptive and high-cost mortgages to unsuspecting borrowers. Industry lobbyists and lawmakers are continuously challenging the law, resulting in weakened rules and delays.
State and local governments should expand efforts to regulate and limit predatory lending.
Robust consumer protection and enhanced regulation of predatory lending can help vulnerable consumers avoid high-cost loans and the cycle of debt they often generate. The federal Consumer Financial Protection Bureau (CFPB) and many states are seeking ways to curb predatory lending. Some local governments are also acting to limit the proliferation of payday lenders and check cashers by using their licensing and zoning powers. San Francisco, for example, enacted permanent zoning restrictions prohibiting high-cost lenders from locating in neighborhoods where they are already concentrated.