We hope that the reform bill will protect consumers with limited access to credit and not just consumers of traditional bank products.

The leader of the Bureau will set the agenda. This is why President Obama should choose a leader who will consider the perspective of ordinary Americans who rely on non-bank financial services to access credit.

Some “consumer advocates” are not always in touch with actual consumers like us.  They have probably never come up short between paychecks and don’t understand that a short-term loan can often be the best solution to take care of emergency needs. 

In order for this Bureau to be effective, the leader must consider the perspective of all consumers, especially those who traditionally have not had a voice or a place at the table- consumers of non-bank services.

Our members use a variety of non-bank financial products to manage their households and many are nervous that a Consumer Financial Protection Bureau, part of the current regulatory reform bill, will regulate these services out of business, rather than make them better.

According to a recent FDIC survey, 21 million American households (about 43 million adults) have bank accounts but rely on non-bank financial services by choice. They are defined as “the underbanked.” Certain racial and ethnic minorities are more likely to be underbanked than the general population, including blacks, American Indians/Alaskans and Hispanics.

Rather than only focusing on protecting those who already have access to a variety of financial services, the new Consumer Financial Protection Bureau should also address the needs of our members and the millions of other underbanked Americans to access realistic and affordable financial products.

As long as the need for quick, convenient loans exists, non-banks should be able to continue to offer the financial services that the traditional banks will not. When an emergency arises and we need a short term, small dollar loan, it doesn’t make sense to be forced into longer term, higher dollar solutions provided by traditional banks. Long- term debt is the last thing we need while already struggling to meet our household responsibilities.

How can we bring “non-bank” financial products into the regulated financial system and how can we help people who use non-banks as a short-term solution build their credit histories so they can eventually graduate to a traditional bank? We need to make sure the new Consumer Federal Protection Bureau addresses these questions.

• Increased interest rates (APRs)
• Penalty fees
• A decline in your credit score
• Denials of future credit

 For those of us who still have the option of using a credit card:

• Scrutinize all credit card offers and terms, especially the “fine print.”
• Don’t be fooled by teaser rates and cash advances.  Under current policy, teaser rates can last a much shorter amount of time than you might anticipate. 
• Credit card cash advances have high interest rates and even a single cash advance can raise the interest paid decades later if an account is never paid in full. 
• Credit card companies will use your monthly payment to pay off the amount due at lower interest rates before applying it to the amount that has a higher interest rate, like a cash advance.

 For those of us working on building our credit score and lowering debt, here is challenge #2.:

• List all your debts (except the house) in order of smallest balance to largest.
• Then pay the minimum payment to stay current on all the debts except the smallest.
• Every dollar you can find from anywhere in your budget should be paid toward the smallest debt until it is paid in full.
• Once the smallest debt is paid, the payment from that debt plus the monthly payment of your next smallest debt should be paid each month to pay off the next smallest debt.
• When debt number two is paid off; you attack debt three, and so on.

Whether you are on a fixed income, a college student, starting a family, or starting over financially, it is empowering to take action to improve your quality of life. You can begin by getting your finances in order.

I challenge you to take two steps toward financial stability today:

1-      The CRC website now has great tips and resources for overcoming financial trouble.  Be sure to visit this new section of our site and start getting your finances in order today!

2-      Start the following exercise with me:

It is important to understand your debt so let’s start off by gathering all your bills, even those you put aside every month without even opening up the envelope.  Make a list by your personal priority-

• Rent/house payment
• Utilities
• Car payment
• Insurance  (house, car, medical)
• Cell phone
• Credit card (1)
• Credit card (2), etc.
• Other misc.

Even if you have not paid a dime on a debt for years, put it on the list.  As we get a clear picture of where we stand financially,  we will get a better understanding of how we are going to start fixing the problem and get back on track to financial freedom.

Over the coming weeks, my blog will feature some easy steps to getting your financial house in order.  I encourage you to check back and take the challenge to build a healthy financial future. 

Let’s get going!

 This should be a victory for hard working families and our neighborhood small businesses and it should help us regain trust in a financial system that is not working for the majority of Americans. After all, we will now have a new consumer watchdog, the Consumer Financial Protection Bureau, that is focused on weeding out predatory lending and making sure lending doesn’t get out of control again.

 My concern is this: Who determines what is predatory and what we need protection from? In an attempt to protect us, will we be left with less financial options?

Once again, others who don’t walk in our shoes or don’t face the same financial challenges we do every month are making decisions for us.

Already your advocacy and voice has made a difference on this issue, so let’s not rest until we are invited to the table to discuss laws that protect and serve the interest of all Americans. Only we can speak to the type of financial services we need to meet our financial obligations and respond to our household emergencies.

These short term loans are sometimes the best option or solution in a financial or medical emergency. The traditional banking institutions will not provide small loans to 25% of the working age population or those on a fixed income (Is this not the same industry that all taxpayers just bailed out?) And, often other options–like bounced check fees or late-bill penalties–are much costlier than a payday loan. The FDIC, an independent government agency, found bounced checks carrying APRs of up to 3,500 percent!

A recent CRC member survey tells us that the most frequently cited use for a payday loan (70.4%) was to pay a utility bill (phone, gas, electric).  About half of the respondents also cited a car repair (52.2%) as a reason for a taking out a payday loan, and 36.4% used a payday loan for a medically related expense.  About half of the respondents provided information on other uses for a payday loan not listed in the survey, including: bank overdraft fees, groceries, credit card payments, gas, car payments, daycare, and education expenses.

For hardworking consumers a payday advance can be a sensible choice for managing financial difficulties and unexpected emergencies. It is simpler, more convenient and fully transparent in terms of cost and fees.

As our lawmakers in Washington D.C. work on a financial reform bill that is intended to protect consumers, I will be watching closely to make sure they do that without taking away our access to credit. I encourage you to do the same. Tell your senator that the best way to protect you is to let you make your own financial decisions: Take Action today.

*The FDIC (Federal Deposit Insurance Corporation) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails.

The Consumers Rights Coalition (CRC) is a fairly new group, made up of members like you–the real consumer. Too often, so-called consumer groups and lawmakers speak for us, without really knowing us. CRC’s mission is to give you the opportunity to speak for yourself.

If you haven’t already done so, take a minute to share your story on our website. We will use your story (but not your last name) to help explain to lawmakers that consumers have limited financial options and taking another one away will only make things worse.

Share your story today!

In thinking about credit card reform, it struck me:  If lawmakers respect a consumer’s choice to enter into credit card debt to solve a cash flow problem- why are they trying to limit access to a cash advance?

I would argue that cash advances are more commonly used for necessities, while credit card debt often accounts for luxuries. I have never heard from a Consumer Rights Coalition member who has used a cash advance or pawn loan for a vacation, theater tickets, or a five-star meal. Yet, these are some of the expenses reflected on many credit cards accounts that are in default or part of a bankruptcy case.

The facts are also clear that consumers who use cash advance products know clearly the costs of such loans.  There is no fine print, no adjusting rates in the middle of the loan, it is typically $12 – $15 for each hundred borrowed.

Informed consumers choose cash advances, pawn loans, on-line loans, and other options to meet their household financial needs. They have done their homework and chosen short-term credit products because it was the right choice for them, just like millions of Americans have turned to credit cards as a financial option.

It is not my place, nor is it the government’s, to decide which financial option is best.  But, that is exactly what lawmakers would be doing by taking one of those options away.

“Every segment of our population and every individual has the right to expect from his government a fair deal.” - Harry S. Truman

• Card issuers must consider the borrower’s ability to repay before issuing the card.
• Statements must be sent no less than 21 days before the due date.
• Cardholders are given 45 days notice before their interest rate is increased or any other major changes are made.
• Interest rates cannot be raised on existing balances unless the cardholder is 60 days late in payment.
• After a rate increase, if the cardholder pays on time for 6 months, the original rate must be restored by the company.
• Payments received by 5:00 pm on the due date will be considered on-time.
• Interest rates cannot be increased within the first 12 months of an account, and promotional rates must last for at least 6 months.
• Over credit limit fees are now prohibited unless agreed upon by the cardholder.
• Cardholders will be given clear disclosure on how long it will take to pay off a balance if minimum payments are made.
• They will also be told the total interest costs if making minimum payments.
• No double-billing cycles.
• No fees related to the method of payment (mail, phone, electronic transfer, etc).
• Card issuers are prohibited from giving cards to people under the age of 21 unless they can prove they have the means to repay the debt, or a parent or guardian co-signs.

Let me know if you have any questions about these new rules by posting a comment to this blog or sending me an email. I’ll do my best to get you answers as soon as possible.

The basic principles of the Civil Rights Movement are full inclusion and equal opportunity for all. Under these principles, we should all have access to financial services that allow us to provide for our families and maintain our households. For some this is the first step towards the American Dream; for others it simply allows us to remain independent and maintain our modest lifestyles with dignity.

Thomas Jefferson said, “That government is best which governs least.”  When dealing with economic regulation, the same should apply. Americans deserve real choices and access to a variety of financial services when deciding how to make ends meet or handle an unexpected emergency.  Government regulation should protect the public interest without eliminating or limiting the financial service options available to hard working Americans.

Now, much like the time of the Civil Rights Movement, participation and involvement in our legislative system is critical. We need to speak out to ensure everyone has opportunities for growth and self sustainability so that we cannot only survive, but prosper.