Elizabeth Warren, Harvard law professor and chair of the Obama administration’s Consumer Financial Protection Bureau, isn’t a fan of hidden charges or complicated consumer credit agreements. Thanks to the reform introduced by the Dodd-Frank Act, Warren’s charge starting July 21 will be policing credit cards, banks, mortgages and non-traditional consumer credit products like payday loans — if she is named the permanent head of the CFPB. In a recent Associated Press interview, Warren underscored the need for simplicity in the consumer credit market.
Credit cards and the need for full disclosure
Elizabeth Warren pointed to the elephantine length of credit card agreements today. The font is tiny and the legal verbiage fills too many pages. Yet within such agreements, there are terms that can make or break a consumer’s finances. “Clearing out the shrubbery” is something Warren wants for U.S. consumers, and this may include improvements in the Schumer box on credit card literature that includes the APR and other periodic information.
Regulating the payday lending industry
For those underserved by the traditional banking system, Warren says that the CFPB will ensure that those consumers will continue to have access to payday loans and will not be taken advantage of. Destroying the payday lending industry isn’t on the agenda, as the alternatives can be dangerous.
“It can force people into unregulated markets, including ‘Jimmy the Leg Breaker,’ which is not where we want people to be,” Warren told the AP.
So long as the terms of a loan are spelled out clearly up front and the consumer is fully informed by the lender as required by law, the payday loan business is as legitimate as any other federally regulated consumer credit.
Small loans where the need is greatest
Extending the kind of short term loans consumers demand into areas that have not been well-served is another issue that will be on Elizabeth Warren’s agenda when the CFPB comes into power on July 21. Warren sees smaller community banks filling the role in part, but payday loan businesses also fit the bill.
Ultimately, great change is predicted in the ways that financial institutions interact with consumers. Warren sees changes coming in terms of online banking, expansions and added security. The way that lenders offer their services to customers will continue to change radically from the traditional model.
Elizabeth Warren on problems with U.S. banking system