Margot Dorfman: A strong Consumer Financial Protection Agency
Column by Margot Dorfman
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The reckless and deceptive practices of our financial industry have devastated businesses, families and our economy. It is time for congressional leaders to stop listening to financial industry lobbyists and start protecting the future of our nation. The U.S. Women’s Chamber of Commerce believes the establishment of a strong Consumer Financial Protection Agency is a crucial step in reforming financial rules and restoring the trust we need to rebuild a thriving American economy.
The CFPA will benefit business, especially small businesses, which create most of the nation’s new jobs. It’s too often forgotten in the debate over the CFPA that small-business owners frequently rely on personal credit — such as personal credit cards and home equity loans — to start, run and expand their business.
Small-business owners have been hit hard by the continuing crisis in business and consumer lending. They have been rocked by waves of credit contraction, foreclosures and business closures — affecting them, their customers, suppliers, the communities they do business in and their families.
Banks that profited from predatory lending now are choking businesses by cutting lines of credit or pulling them entirely.
Some of our members have been forced out of business. Others are struggling to keep doors open. Many of our members can’t expand their businesses even though they have viable business opportunities because they cannot access the credit needed to capitalize on their opportunities. Even with orders and contracts in hand, they can’t get credit needed to hire new workers, buy new equipment and add necessary business infrastructures.
The unscrupulous practices of the credit-card industry have delivered another hard blow, as unwarranted credit rate escalation, increased fees, and decreased credit availability have left many firms unable to manage day-to-day purchases.
Lenders offering sound mortgages and other credit were undercut by those pushing misleading products with hidden risks. Women were 32 percent more likely to have received subprime mortgages of all types than men, regardless of income. Women also are 41 percent more likely than men to have received higher-cost subprime loans, regardless of income.
Women business owners and consumers have been hurt especially hard by predatory lending. Millions of women business owners, who used their home equity to secure small-business loans, are at risk of losing both their homes and businesses.
Elizabeth Warren, chair of the Congressional Oversight Panel charged with reviewing the state of the financial markets and regulatory systems, provided this snapshot of economic devastation in a December article: “One in five Americans is unemployed, underemployed or just plain out of work. One in nine families can’t make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put 10 million homeowners out on the street.”
A disproportionate number of those suffering are women. Women, who were already at a higher risk for retirement insecurity, are now terrified about what the future will hold.
We cannot let the financial practices that drove us to this disaster continue. If we do, there will be no real recovery for business and for women generally. The next crisis, when it comes, will be even worse.
Business owners and consumers need the security of knowing that the costs and risks of financial products, services and lending are fully and fairly disclosed. We need a strong federal agency to promote financial product safety and accountability. We need a CFPA with independent rule-making authority and enforcement powers.
We cannot let financial industry lobbyists succeed in killing the CFPA or winning a pale substitute that would not actually be able to protect consumers and small-business owners. We cannot accept a CFPA subject to interference by bank regulators who have failed us time and time again.
We cannot let those whose risky, deceptive practices destroyed so many jobs and businesses kill the reforms designed to prevent the next calamity. It is time for our Congressional leaders to act to support the financial protection and well-being of all Americans.
Margot Dorfman is CEO of The U.S. Women’s Chamber of Commerce, the leading advocate for women on economic and leadership issues, and vice president of the National Association of Small Business Contractors.