Establishment of low-risk checking or prepaid accounts at banks and credit unions, and use of “alternative data” in building credit records, continue to be goals of the Consumer Financial Protection Bureau (CFPB) in battling financial inequality, its director told a Labor Day audience.
Speaking to an AFL-CIO Labor Day Picnic in Cincinnati, CFPB Director Richard Cordray outlined some of the current efforts of the bureau to combat financial inequality, in an otherwise expansive speech about consumer protection.
Cordray said about 10 million households nationwide do not use banks, and called that expensive. “Saving is harder, and no interest is earned. Cashing a check or paying a bill means going in person and paying a fee. This takes time and costs precious dollars, all of which makes it hard to climb the economic ladder,” he said.
He asserted that the bureau is addressing the issue through “initiatives to empower consumers by making them more financially capable,” and by urging banks and credit unions to offer low-risk checking or prepaid accounts. He said doing so will allow more people to gain access to the “mainstream financial system.”
Cordray also pointed to lack of access to traditional credit as another form of financial inequality, saying that 26 people nationwide are “credit invisible,” or have no formal credit history. He said that blocks them from qualifying for most loans. “To attack this problem, we are looking at how other kinds of information, such as payments for rent or mobile phone bills, can be used to build credit records,” Cordray said. “We are pushing for more accurate credit information, and more transparency, so people are not unfairly denied credit.”
He also said the bureau is working to “clean up” discriminatory practices that prevent persons with good credit histories from obtaining loans on fair terms.