Blog ››› ››› ALEX MORASH
A day after The Wall Street Journal attacked the Consumer Financial Protection Bureau for attempting to rein in racial bias in auto loan practices, Politico questioned the agency for seeking advice from a consumer advocacy group that many media outlets -- including Politico -- frequently ask to comment on consumer issues.
On November 19, Politico questioned the Consumer Financial Protection Bureau's (CFPB) supposedly "cozy" relationship with a consumer advocacy group after emails revealed the agency consulted with the Center for Responsible Lending (CRL) on payday lending reforms. CRL is a leading source of research on the issue of payday loans; however the article misleadingly compared the CFPB consulting with a consumer advocacy nonprofit to the often nefarious "influence of big banks and lobbyists in writing legislation":
When the Consumer Financial Protection Bureau put out its proposal to overhaul payday lending rules in March, the move was cheered by consumer advocates as a much-needed crackdown on an industry that preys on the poor.
But the final product wasn't a surprise to at least one nonprofit group.
While Elizabeth Warren and other progressives decry the influence of big banks and lobbyists in writing legislation, in this instance, the agency created by Warren to protect consumers from abusive lending leaned heavily on consumer activists as it drafted regulations for the $46 billion payday loan industry. The Center for Responsible Lending spent hours consulting with senior Obama administration officials, giving input on how to implement the rule that would restrict the vast majority of short-term loans with interest rates often higher than 400 percent. The group regularly sent over policy papers, traded emails and met multiple times with top officials responsible for drafting the rule.
Politico's criticism comes a day after The Wall Street Journal's editorial board lambasted the agency for drafting guidelines on ending racial bias in auto lending, and advocated for legislation to slow the CFPB's consumer advocacy work.
Politico's false comparison that consumer watchdogs have the same pervasive effect as big banks on legislation and rulemaking fails to note that the Center for Responsible Lending is a well-respected resource on financial products and how these products affect consumers. In the last month, research from the CRL has been cited by a Yale professor in The New York Times, and appeared in articles in Time, The Atlantic and The Huffington Post. On November 19, The Washington Post's Dave Weigel took to Facebook to criticize Politico, explaining to readers that "the nonprofit Center for Responsible Lending, which reporters who have covered any of this stuff recognize as a pretty above-board group that lobbies against predatory loan practices":
In 2009, the Center for Responsible Lending uncovered that 76 percent of the total volume of payday loans are borrowers taking out new loans to pay their existing loan. The CRL also reported that payday loan practices lead to $3.4 billion in excessive fees a year with over 75 percent of these fees generated by borrowers with more than 10 loans a year. The CRL and its sister non-profit -- the Self Help Credit Union -- use this research to advocate for lending practices that will end the perpetual payday loan cycle, saving low income Americans billions.
While Politico questioned why "CFPB requested data from the nonprofit on payday lenders 'to help focus these efforts,'" it failed to mention it has used reports and published comments from the Center for Responsible Lending on multiple occasions in relation to financial products and legislation. On October 29, Politico asked CRL's Maura Dundon to explain a financial ruling on student loans and, on October 16, quoted Dundon to emphasize the strength of a CFPB crackdown on for-profit colleges. In December of 2008, Politico reported on the CRL findings that minority homeowners were pushed into higher priced mortgage options:
Research by the Center for Responsible Lending, for instance, shows that African-American and Latino homeowners were often steered into subprime mortgages with hefty fees when their credit scores in fact qualified them for less expensive prime loans. Now those groups are experiencing some of the highest rates of foreclosure.