While President Obama
traveled to New York Thursday to make his case for financial reform legislation, a member of the White House Council of Economic Advisors explained its particular importance for African Americans and minorities, who have been disproportionately hard hit.
In a conference call, Cecilia Rouse, like the president, highlighted the creation of a consumer financial protection agency that she said would hold financial firms to high standards. Some companies have been going after "the most vulnerable consumers," she said, making money off of them in a way that was "unacceptable." She said evidence has shown that African-Americans are more likely to be victimized.
Rouse said the president's plan would target practices surrounding payday lenders, check cashers and other alternative financial services companies. While "payday lenders serve a role in our financial system," Rouse said, it's important that consumers taking out a payday loan understand the terms in order to avoid hidden fees.
[Sen. Kay Hagan (D-N.C.) released a statement Thursday saying she would introduce the Payday Lending Limitation Act of 2010 with co-sponsors Sen. Richard Durbin (D-Ill.) and Charles Schumer (D-N.Y.). It is meant to ensure that "short-term cash advances remain short-term." The bill would modify the Truth in Lending Act to prohibit creditors from issuing new payday loans to borrowers with six loans in the previous 12 months, provide extended repayment plans, and regulate the payday lending industry.]
When the financial crisis hit, low-income and minority borrowers -- sometimes more than banks and financial institutions -- found themselves blamed for taking on loans they could not afford. Based on an analysis of Census data, the Pew Hispanic Cente
r found in a 2009 report that black householders "raised their homeownership rate from 41.9 percent in 1995 to 49.4 percent in 2004. By 2008, the black homeownership rate had decreased to 47.5 percent."
Though Rouse -- as Obama has -- acknowledged that there are unwise borrowers, she also put the focus on practices that steered prospective minority homebuyers into risky subprime loans even when they qualified for traditional financing.
According to a White House statement, the consumer protection agency would "focus on improving disclosures and cracking down on abusive practices to make it easier for families to identify and avoid high cost, high risk products that don't meet their needs."
Rouse said there also would be "a push to get more households into the regular banking system," with an emphasis on simplifying language and paperwork, encouraging financial literacy, and bringing an end to overdraft enrollment.
The Obama administration has been encouraged by the Congressional Black Caucus and others to focus more attention on African- Americans most affected by the recession. Others – for example, Tea Party members in a New York Times/CBS News poll
– are more likely to say too much has been made of problems facing blacks.
The president and his team have been careful to emphasize the ways that financial reform would benefit not just African-Americans, but all consumers.