(1 of 5) Long Beach, CA: Field hearing on debt collection and the Latino community


Regional Director for the FTC’s Western Region.
We have offices in L.A. and San Francisco. in San Francisco and L.A. This roundtable
is going to be a great opportunity for the industry, for community groups, for enforcers
to talk about debt collection practices and the Latino community. We have folks from the
FTC, we have folks from the Consumer Financial Protection Bureau, a new federal agency with
new powers. We’ve got a lot of staff and officials from them that you’ll be hearing from today.
But we also have our partners in Southern California. We’re always proud to work with
Los Angeles Department of Consumer Affairs, Brian Stiger and Rigo Reyes. We have the California
State AG’s Office, and, most importantly, we have Professor Peter Kreysa and the Cal
State Long Beach folks, who are hosting us, and we really appreciate everything you’ve
done to make this a successful conference. Now, It is my pleasure to start this off by
introducing Ricardo Lara, the California State Senator for this district. Senator Lara was
elected in November of 2012, to represent the 33rd District, which includes Huntington
Park and Long Beach. Raised in a blue-collar immigrant family in East L.A., Senator Lara
knows firsthand the challenges facing the cities and communities of southeast Los Angeles
County. Senator? [Applause.] Thank you, Tom. Welcome to Long Beach. Welcome
to the 33rd Senate District. It’s my pleasure to give you the official bienvenido, as we
say in Spanish. It’s great to be here. First and foremost, I want to thank you all for
coming today and talking about such an important topic. As I was walking over, just thinking
about the importance of not only protecting the Latino community but protecting all immigrant
communities from ensuring that they’re not subject to any form of discrimination or being
accosted by some unscrupulous methods of debt collection. As the Chair of the Latino Caucus, I want
to thank the Federal Trade Commission and the Consumer Financial Protection Bureau for
holdings its important discussion about debt collection and the Latino community here in
Long Beach. The Latino Caucus in California is made up of 24 members, 17 members of the
Assembly and 7 in the State Senate, who represent a wide array of constituencies up and down
California. For those of you that might not be aware, Latinos constitute now the plurality
in California, 39 percent of the general population. Coupled with the fact that more 51 percent
of the children in our public schools today are made up of Latinos, coupled with African
Americans and APIs, we become 70 percent of the kids in our public schools. So it’s important,
more than ever, that we work together in order to protect our immigrant communities, but
that we show the success of these kids, because without their success, the future of California
will surely falter. I’m proud to say that California is back,
stronger than ever. We are back as the eighth largest economy in the world. We have just
surpassed Russia and Italy’s economy. By 2015, we’re scheduled to surpass the U.K. and France,
putting us as the sixth largest economy in the world. I’m proud to say that California
is truly a nation state, made up of a wide array of people from all over the world. And, as a former Chairman of the Select Committee
on Financial Empowerment, we are working, in the legislature, to ensure that we work
with our immigrant communities to ensure that we educate them on how to build wealth, and
how to protect themselves, and to ensure that they know what their rights are, in terms
of not only their financial empowerment. I use my own family as an example, as somebody
who has two parents who are immigrants from Mexico. I wish they understood what it was
to even have a discussion about money, and how to protect yourselves, and how to ensure
that you know your rights when it comes to not only debt collection but building wealth
for yourself, banking on your future and ensuring that you build a nest egg for the next generation.
A lot of us don’t have that luxury, and especially for those of us that have parents who are
working two or three jobs to make ends meet. So, I just want to welcome you again this
morning. We have our staff on the livestream, as well, and we’re trying to figure out what
we can do, as a state, to continue to move policies that protect our vulnerable Californians,
and ensure that they also have and understand the rights, as consumers, here in our great
state. So I want to just thank you again, and hopefully you have a wonderful conference
here, and, again, welcome to Long Beach. I would like now to take the opportunity to
welcome our next distinguished speaker, who is a native of Southern California, Chairwoman
of the Federal Trade Commission, Edith Ramirez. Edith was sworn in as Commissioner of the
Federal Trade Commission in April of 2010, and became the Chairwoman of the FTC in March
of 2013. At the FTC, Chairwoman Ramirez has focused on promoting competition and innovation
in the technology and health care sectors, protecting consumers from deceptive and unfair
practices, and safeguarding our consumer privacy. Before joining the FTC, Chairwoman Ramirez
was a partner in the Los Angeles office of Quinn Emanuel Urquhart & Sullivan, where she
litigated complex business disputes, including intellectual property, antitrust, unfair competition,
and advertising matters. She is a graduate of Harvard Law School, where she was the Editor
of the Harvard Law Review, and Harvard College. Very impressive. Please join me in welcoming Chairwoman Edith
Ramirez. [Applause.] Thank you very much, Senator Lara. It is truly
a delight for me to be here with you this morning. As has been mentioned, I am a Southern
California native, so it’s wonderful to be here, back home from Washington, to have an
opportunity to discuss very important issues with you today. And I’m very pleased, of course,
to welcome all of you to this joint Federal Trade Commission and Consumer Financial Protection
Bureau Roundtable on this incredibly important issue of debt collection issues facing the
Latino community, especially those Latinos who have limited English proficiency. This discussion really couldn’t be more timely.
It addresses the impact of one of the most important consumer protection issues on one
of the nation’s largest and fastest-growing communities. Debt collection and related credit
reporting issues affect just about every single American in one way or another. The Federal
Reserve estimated, in 2013, that 30 million Americans, or nearly 15 percent of the adult
population, had a debt in third-party collections. The Fed also found that the average size of
that debt was $1,400. More recently, a study by the Urban Institute estimated that 35 percent
of Americans with a credit record have debts and unpaid bills that have been reported to
collection agencies. So in light of these significant statistics,
you won’t be surprised to hear that the FTC receives more complaints about debt collection
than any other industry. Last year, for example, the FTC received over 204,000 complaints in
this area, representing nearly a quarter of all the complaints that we received last year.
So debt collection has been, and is going to continue to be a major priority for me
and for my agency. In fact, for several years, we’ve been stepping up our law enforcement
in this area. And, as we examine debt collection, and potential
abuses by collectors, I think it’s important to discuss the impact they have on the many
diverse communities that we work to serve. So, for this reason, I recently launched what
we at the FTC call the Every Community Initiative. It’s designed to ensure that our efforts reach
all consumers, including those who may experience the market different, or may be harder to
reach with law enforcement and education efforts. As part of that initiative, we’re trying to
broaden our understanding of the debt collection and credit reporting experiences of limited-English-proficiency
consumers. The Latino community is a natural place to
start, because it represents the largest group of limited-English-proficiency consumers in
the United States. Approximately 34 million Americans speak Spanish at home. In fact,
I grew up speaking Spanish at home. I’m the daughter of Mexican immigrants. Of those 34
million Americans, approximately 20 million don’t speak English well. While many Americans
speak languages other than English or Spanish, no other language is nearly as prevalent,
so we believe that learning about Latino consumers in this context will help us better understand
the experiences and challenges faced by other groups with limited English language skills. In addition, consumer advocates have voiced
concerns to the FTC that the debt collection practices that are aimed at Spanish-speaking
consumers may be particularly egregious. Our own law enforcement experience suggests that
this may be the case. The Commission has brought a number of cases against companies that have
targeted Spanish-speakers with deceptive and abusive conduct, and, in fact, just this week,
we obtained a temporary restraining order against an operation, Centro Natural, that
we allege targeted Spanish-speaking consumers with deceptive and harassing collection calls
for debts they often didn’t even owe. We charged, in our complaint, that these defendants also
masqueraded as government or court officials and threatened consumers with legal proceedings
if they failed to pay. But the purpose of the roundtable is not to
address these issues with any preconceived notions. It’s instead designed to gather information.
We want to hear the perspective of all interested parties—consumers, debt collectors, the
credit reporting industry, consumer advocates, community service organizations, academics,
and state regulators. We also hope that this event will raise awareness within the Latino
communities about the work of the FTC and the CFPB, and, specifically, we want consumers
to contact us if they have a problem with a debt collector or with the credit reporting
process. We hope that those of you in the audience who have Latino clients will encourage
them to submit complaints to us. To reach the FTC, consumers can call our Consumer Response
Center at 877-FTC-HELP and speak to our Spanish-speaking complaint representatives. They can also submit
written complaints online, in either English or Spanish, at our website, ftc.com/complaint
or—[speaking Spanish language]. If your clients are uncomfortable submitting
their complaints themselves, we ask you to assist them. We often use these complaints
to determine which companies we’ll target for law enforcement, so we actually want to
be sure that we are hearing from the Latino community. And beyond receiving consumer complaints,
we also want to make sure that we’re educating Latino consumers about their legal rights.
We have useful materials explaining the relevant law, and the debt collection and credit reporting
processes more generally, many of which are also available in Spanish, and we have copies
of these materials here today and we hope that you’ll take them back to your offices.
If you want larger quantities, you should also feel free to order them in bulk from
our website. Another goal of today’s roundtable is to hear
from industry, and to learn about the companies that collect from Spanish speakers. Among
the questions that we’re going to be asking is whether these collectors use different
methods when collecting from Latinos than from other consumers. What triggers their
decisions to communicate with a consumer in Spanish rather than in English? And if a creditor
or a debt-buyer decides to communicate with the consumer in Spanish, does that company
pass this information on to whichever company later purchases the consumers debt? Finally, today’s roundtable also provides
us with a wonderful opportunity to strengthen our partnerships with community legal services
agencies, consumer advocacy organizations, and state law enforcement agencies. We’re
already working very closely with many of you, and we hope to collaborate even further
to provide greater protection for our nation’s consumers. Let me just take a few minutes right now to
tell you about the excellent program that we have planned for today. Following my remarks,
you’re going to hear next from Zixta Martinez, of the CFPB, and then from Marisabel Torres
of the National Council of La Raza. She will set the stage for the rest of the day by talking
about Latinos’ access to financial products and their engagement in this marketplace. We will then have our first panel, which will
examine the collection of debts from Latino consumers before litigation. This group will
discuss whether some Latinos perceive debt and debt collection differently than other
consumers, and how working with limited-English-proficiency Latinos affects the collection process, as
well as whether there are best practices for collecting from Latinos generally, and limited
English fluency Latinos, more specifically. Our second panel will begin right after lunch
and will focus on the experiences of limited-English-proficiency Latinos once the collection litigation process
begins. The panelists will discuss whether these consumers have a harder time accessing
the courts when sued for a debt, and whether debt collectors use different litigation methods
with Latinos than they do with other consumers. Our third panel will address credit reporting
issues among LEP Latinos, including whether there are factors that make it more difficult
for them to obtain their credit reports, understand those reports, and dispute inaccurate information.
The panel will also discuss whether consumers should be able to dispute the items on their
credit reports in Spanish. Our final panel will focus on developing improved strategies
for educating and reaching out to Latinos about debt collection. Among other topics,
the group will provide a high-level overview of available educational resources and discuss
how we can do a better job of educating Latino consumers about their rights in debt collection
and credit reporting. To close the program, Gail Hillebrand of the
CFPB and Chris Koegel of the FTC will talk about the lessons we’ve learned during the
course of the day and steps that we can all take to protect consumers. So we’ve got a terrific day planned ahead,
but before turning the floor over to Zixta, I want to take this opportunity to thank the
people who made this event possible. Let me give another shout-out to Cal State Long Beach
for generously providing this terrific venue, and, in particular, to Professor Peter Kreysa
for his tireless efforts helping us plan this event. Let me also thank Rigo Reyes of the
L.A. County Department of Consumer Affairs, and Pastor Herrera, formerly with the Department
of Consumer Affairs. He’s now a professor at Cal State Northridge. Both of them provided
incredibly valuable suggestions, advice, and assistance. The CFPB and its staff, I also want to thank
them for co-hosting this roundtable with us, and also our FTC staff, including Chris Koegel,
Tom Kane, Cristina Miranda, Ann Stahl, and Maricela Segura. And finally, I want to thank
the panelists for giving their time and their expertise in helping us examine these critically
important questions. So thank you all very much, and I hope that you find today interesting
and a great learning experience. Thank you, and let me hand the floor over
to Zixta Martinez. Actually, I think Tom is going to give a brief introduction. [Applause.] Thank you, Chairwoman Ramirez. I just wanted
to tell you a little bit about our next speaker, Zixta Martinez, who is Associate Director
for External Affairs at the CFPB. She joined the CFPB from Freddie Mac, where she was Senior
Director for Industry and State Relations. Before that, she was director at the National
Fair Housing Alliance, legislative staff attorney at MALDEF, housing policy analyst for National
Council of La Raza, and a staffer in the U.S. House of Representatives. Zixta? [Applause.] Thank you, Tom, for the kind introduction,
thank you to Senator Lara for his work on behalf of Latinos and consumers, and thank
you to the Federal Trade Commission and Chairwoman Ramirez for partnering with the Consumer Financial
Protection Bureau to examine how debt collection and credit reporting issues affect the Latino
community. And thank you all for joining us today to take part in this substantive and
important conversation. I’m very pleased to be here today to provide
an overview of the CFPB, and discuss the steps that the Bureau is taking to assist Latinos
in the consumer financial products and services market. There are over 54 million Latinos
in the U.S. and it is important that our voices and experiences help shape the market for
consumer financial products and services. By joining us today, you are providing critical
information to the CFPB and FTC on issues that Latino consumers face when they deal
with debt collectors or credit reporting companies. As the Associate Director for External Affairs
at the CFPB, I have the responsibility and the privilege for ensuring that the Bureau
has the benefit of a wide range of perspectives, feedback, and expertise to inform the Bureau’s
work, including the perspective of nonprofits and community groups, Congress, our local,
state, and federal government partners, the financial services industry, its trade associations
and representatives, academics, and many others. The CFPB is an independent federal agency
whose mission is to help consumer finance markets work, by making rules more effective,
by consistently and fairly enforcing those rules, and by empowering consumers to take
more control over their economic lives. As many of you may know, before the financial
crisis, authority for consumer financial protection laws was delegated to seven different federal
agencies, none of which had all the tools needed to oversee the entire consumer finance
market. In July 2010, Congress passed, and President Obama signed, the Wall Street Reform
and Consumer Protection Act, which created the CFPB. One year later, the CFPB formally
opened for business. So we’re a relatively new federal agency,
but we have not squandered our youth. Here’s a snapshot of some of what we’ve been up to.
Our supervision and enforcement efforts together have provided approximately $5.75 billion
in refunds and relief to over 15 million consumers. We’ve handed complaints from approximately
460,000 consumers about the problems they experience with consumer financial products
and services. In the student loan market, we’ve teamed up with the Department of Education
to create tools like the Financial Aid Shopping Sheet, which has been voluntarily adopted
by over 2,000 colleges and universities. We’ve issued a remittance rule that, for the
first time, allows remittance centers to know how much it will cost to send a remittance,
and how much a loved one will receive with greater certainty and with applicable consumer
protections. We’ve also issued seven mortgage rules that are fundamentally restructuring
the mortgage market. To give you a better sense of our mission
and the tools that we have to fulfill it, let me briefly describe some of the work that
our divisions are currently undertaking. The Bureau’s Office of Consumer Response assists
consumers in submitting complaints and connects consumers to useful information about financial
products and services. We take complaints about credit cards, mortgages, student loans,
checking accounts, auto loans, remittances, debt collection, prepaid cards, debit cards,
payday loans, and credit reporting. Consumers can submit a complaint at consumerfinance.gov,
by U.S. Mail, by fax, or by calling 1-855-411-2372. Spanish-speaking consumers who call in with
their complaint can speak to a consumer representative in Spanish, and can receive regular updates
on their complaint in Spanish. The CFPB hotline also offers assistance in 180 other languages.
In many cases, we are able to get people relief, either money back or correcting their credit
report or stopping harassing phone calls by debt collectors, just to give a few examples. Debt collection is our largest source of consumer
complaints. We receive approximately 6,700 debt collection complaints per month. These
complaints are not only opportunities for us to assist consumers, they also make a difference
by informing our work and helping us identify problems. They feed into another division
that has an important tool to fulfill our mandate. That’s the Division of Supervision,
Enforcement, and Fair Lending. This division’s work is focused on issues of compliance with
the law and identifying risks to consumers. The CFPB supervises depository financial institutions
with over $10 billion in assets, and we supervise non-bank entities in the mortgage business,
payday lenders, and private student loan companies of all sizes. We also supervise the larger
participants of the non-bank, debt collection, consumer reporting, and remittance markets.
Last month, we announced a proposal to oversee the larger non-bank auto finance companies
for the first time at the federal level. That proposal is currently open and we welcome
your comments. The Bureau’s Supervision, Enforcement, and Fair Lending Offices enforce federal consumer
financial protection laws in order to create a fair environment for all market participants,
consumers, and providers alike. We recognize that the financial industry can
provide great value to consumers by offering appropriate products and services. However,
we will use our enforcement tools to address bad actors in the market that seek an unfair
competitive advantage based on skirting the law and mistreating consumers. For instance,
in June of this year, the Bureau ordered GE Capital to provide an estimated $225 million
in relief to consumers harmed by illegal and discriminatory credit card practices. CFPB examiners identified a number of deceptive
marketing practices and discovered that GE Capital did not extend certain promotional
offers that allowed consumers to cancel a portion of their debt, to consumers who indicated
that they preferred to communicate in Spanish or had a mailing address in Puerto Rico, even
if that consumer met the promotion’s qualifications. This meant that Hispanic populations were
unfairly denied the opportunity to benefit from these debt-cancellation promotions. This
is just one example of CFPB enforcement actions that have resulted in nearly $5.75 billion
in refunds and relief to over 15 million consumers who have been subjected to illegal practices. The Bureau’s Division of Consumer Education
and Engagement is dedicated to making sure that consumers are empowered with proven,
effective financial education tools and resources that will assist them in making sound financial
choices. Our primary goal is to help consumers understand the costs, risks, and benefits
of financial products that will help them achieve their personal financial goals. My
colleague, Gail Hillebrand, the Associate Director for Consumer Education and Engagement,
is here with us today and will share more about the Bureau’s consumer focused-tools
when she closes out today’s program. Since we are here today to talk about debt
collection and credit reporting, I want to take just a moment to talk about our Division
of Research, Regulations, and Markets, which last year issued an advance notice of proposed
rulemaking, known as an ANPR, on debt collection. We are considering developing rules because
of the persistence of significant consumer protection problems in debt collection, despite
vigorous government use of enforcement, education, and other efforts to address them. Nearly
1 out of every 10 American consumers came out of the financial crisis with one or more
debts in collection. This market is also the single biggest source of complaints to the
Federal Government. We are considering developing rules to evaluate
whether certain standards need to be clarified in light of the significant technological
changes in the debt collection industry, since the enactment of the Fair Debt Collection
Practices Act in 1977. Debt collection reduces the cost creditors incur through their lending
activities. It does this directly through the amounts that collection recovers from
consumers for owners of debtors, but also indirectly underscores that creditors must
be prudent in lending money that a consumer can repay. Potentially, these reductions in
losses, in turn, allows creditors to provide more credit to consumers at lower prices through
lower interest rates, for example. But there are also risks to consumers arising
from debt collection. Some of the issues under consideration by the Bureau, as we weigh new
productions, include the accuracy of information used by debt collectors, how to ensure that
consumers know their rights, and the communication tactics set collectors use. We asked consumers
to share with the Bureau their experiences with debt collectors, and asked the industry
for information about their practices. We received over 23,000 comments. We heard from
individual consumers, consumer advocates, vendors, original creditors, debt collectors,
debt buyers, plaintiff and defense attorneys, as well as members of Congress. While we are still carefully reviewing these
comments and issues, several themes are developing. First, a significant number of commenters
focused on the types of information that should travel with debt collection when it is sold,
and the consumer advantages that might result from the transfer of additional information.
Commenters also questioned whether certain types of debts, specifically medical or student
loan debt, should require more or less documentation. Second, the debt industry has experienced
significant technology changes since the enactment of the FDCPA in 1977. Currently, the FDCPA
does not specifically address the use of new types of technology, like e-mail. As a result,
many commenters thought it would be useful for the Bureau to address the use of newer
technologies, updating the legal framework to protect today’s consumers, and to allow
fair and appropriate use of modern technology is a high priority for the CFPB. Third, many consumer groups and industry representatives
supported rules addressing or clarifying issues related to the proper time, place, and manner
of debt collection communications. However, there was no consensus view on how the Bureau
should address these issues. Fourth, consumer groups stated that there
were ongoing problems with consumers not receiving adequate service of process and with debt
collectors not having sufficient documentation to support claims in court. Thirty-one state
attorneys general filed a letter with the Bureau, noting that the CFPB’s rules could
be used to complement some of the changes in court procedures that are occurring in
the states. In addition to these issues, three ANPR questions sought comments about collecting
debts from limited English speaking consumers. One thing we heard repeatedly was that the
FDCPA, which also governs communications between debt collectors and consumers, does not explicitly
address collections in Spanish, or, for that matter, in any other language. So, for example, there’s no clear guidance
for businesses or consumers on whether the statutorily required validation notice, which
provides consumers with certain information about the debt and the consumer’s right to
request verifications of that debt, can or should be in Spanish. Commenters stressed
that the interpretation and application of some FDCPA provisions relating to communications
might be especially relevant to Spanish-language collections. The Bureau and the FTC are especially
interested in what our panelists have to say about this and other topics at the roundtable
today. In addition to the tools I’ve identified,
the CFPB has taken a number of other steps specifically geared towards improving consumer
protection for the Latino community. We regularly convene a cross-divisional, Bureau-wide language
access working group, dedicated to addressing consumers’ language access needs in the consumer
finance space. Indeed, the Bureau’s Consumer Advisory Board convened a public hearing on
this topic last May. Recently, we released a proposed language access plan which, when
finalized, will outline the Bureau’s approach to better serving consumers in other languages.
The proposed plan was published in the Federal Register on October 8th, and, again, we welcome
your comments. And I am pleased to announce today that we
are further assisting Spanish-speaking consumers by publishing five different action letters
in Spanish, that will provide instructions on how to send an English-language version
of the same letter to communicate with a debt collector. These letters are not meant to
be a substitute for legal advice or representation that consumers may want to seek to preserve
their legal rights. Rather, they are important tools that consumers can use to proactively
protect themselves, and that consumer advocates can use to assist their clients. The point
of these action letters is to place debt collection activities on the plane where they belong.
They are business dealings that should not be unfair, deceptive, or abusive. Armed with
the knowledge of their rights and how to pursue them, consumers will be able to defend against
such tactics in a deliberate and well-informed manner. These resources are available as part
of our Ask CFPB at consumerfinance.gov, CFPB in Espanol. I’ll close by reiterating, the Bureau will
strive to continue to be thoughtful about which tools to rely upon as we work to make
markets for consumer financial products and service work for Latinos and for all consumers.
Our approach to engaging with the Hispanic community is to ensure that Latino groups,
like NCLR and many, many others join us at the table on every issue, sharing their expertise,
feedback, and insight. This is our commitment to engaging with consumer groups, regardless
of their affinity focus. And just to give you an idea of the volume of our engagement
with nonprofit and community groups, between April and June of this year, the Bureau completed
100 formal engagements, including 71 policy meetings, 17 roundtables and conference calls,
and 12 public events and experiences to engage consumer and civil rights groups, over a 3-month
period. It is also of utmost importance to me, personally,
and integral to the Bureau’s mission that we do our best to have our workforce reflect
the broad diversity of the American public. The Bureau has met with the National Hispanic
Leadership Agenda, among others, on the issue of attracting Hispanic talent at all levels
of the Bureau, and we are extremely fortunate that the CFPB’s director, Richard Cordray,
is deeply committed to equal opportunity and fairness. We believe diversity strengthens
an organization. As a general principle, diversity is good for all businesses and the customers
they serve. Diversity fosters greater understanding and greater opportunities. We believe in these
principles when it comes to the consumer financial markets, and we believe in these principles
when it comes to our own operations. Thank you for joining FTC and the CFPB here
today to discuss and learn more about debt collection and credit reporting issues that
affect Latino consumers. With eager anticipation, I look forward to listening and learning from
our roundtable experts. Thank you. [Applause.] Thank you, Zixta. Next I would like to introduce
Marisabel Torres, Senior Policy Analyst at National Council of La Raza. In her current
position, Ms. Torres focuses on banking and home ownership policies affecting Latino families.
She holds a BA in International Affairs from the University of Mary Washington. [Applause.] Hi. Good morning. I’m very happy to be joining
you here today. For those who are not familiar with the National Council of La Raza, we are
the nation’s largest Hispanic civil rights and advocacy organizations. We have a network
of close to 300 affiliated organizations. We’re all independent, nonprofit, consumer-based
organizations throughout the country. We are able to reach Latinos in about 41 states,
through our CBO network. Sixty-one of those community-based organizations in our network
are actually housed in California. I’m going to give you a little bit of background
on some of the demographic issues facing Latinos as well as what some of the research at NCLR
has done, specifically on financial access for Latinos and immigrants in the financial
engagement and the formal financial industry relationships that they have. Latino families share the same fundamental
goals of financial security and upward mobility as the vast majority of all Americans. To
achieve the security that has long characterized the middle class, most are relying on financial
tools, including home ownership, to gradually expand their access to wealth-sustaining or
income-generating assets. Building positive net worth and an asset-based financial safety
net often takes years or even decades. True transformation of the Latino community will
come when assets are successfully maintained over their lifecycles and passed on to their
children. Unfortunately, attainment of this goal has been impeded for a significant number
of Hispanic families. Current economic conditions have exacerbated the historical and systemic
barriers that Hispanic households confront when connecting with entry-level financial
tools and long-term assets, as well. The 2010 annual census results have documented
the growing demographic changes throughout the nation, and we know that more than half
of the growth of the total U.S. population from 2000 to 2010 was attributed to the Hispanic
population, which now constitutes about 16 percent of the total U.S. population. Data
show that investment in Hispanic families and children will benefit the national economy.
However, the Great Recession has eroded most of the gains in financial security and asset
accumulation of the last decade, and set families further behind. This information is from a recent report by
the Urban Institute, which is showing us, basically it illustrates the racial wealth
gap. We know that’s widened since the recession. In 2010, white families had, on average, more
than six times the wealth of African Americans and Hispanics. Between 2007 and 2010, Hispanic
wealth was cut by over 40 percent, compared to white families’ wealth, which fell by about
11 percent. Because many Hispanic families bought homes
just before the recession, this sharp decline in housing prices resulted in a massive loss
of home equity, and, consequently, wealth for these families. And we know that the gaps
will only widen without targeted federal policies that promote financial access, stability,
and affordable home ownership opportunities. Five years after the collapse of the subprime
mortgage market and the ensuing financial crisis, the nation’s housing and financial
markets remain broken. Federal efforts to resolve the foreclosure crisis fell short,
and enforcement action against egregious violations of the public’s trust by financial institutions
only got underway in earnest in about 2012. The path to financial security has been further
muddled by a political environment that continues to scapegoat immigrants for a wide range of
social concerns. Moreover, regulators, policy-makers, and industry officials often overlook the
unique needs of Latino and immigrant consumers, such as the need for more flexible underwriting
criteria, which is why roundtables like today and efforts by the FTC and CFPB are so important
to fix these problems. However, the financial stability and home
purchasing power of immigrants should be a primary concern for local and national financial
markets. Immigrants are disproportionately unbanked and rely heavily on high-cost financial
services, and are a target of predatory loans and financial products. Research shows that
children emulate the banking habits of their parents often, meaning that the disenfranchisement
of immigrants from mainstream banking could linger into the next generation. Furthermore, the future financial needs of
immigrants are compelling. Should a comprehensive immigration reform, or, rather, when comprehensive
immigration reform becomes law, undocumented immigrants will most likely have to pay fines
as their first step towards legal status, plus additional fees throughout the process
of becoming a legal permanent resident, and ultimately a U.S. citizen. With an estimated
11 million undocumented immigrants living in the country, this could translate into
a multi-billion dollar market for small-dollar loans. In addition, immigrants and their children
will account for 82 percent of the growth in new households between 2005 and 2050. By
2020, half of home buyers will be Latino. This potential demonstrates a compelling case
for ensuring that the housing and financial markets are inclusive and sustainable for
all consumers This is just some demographic information
from Census 2010, showing that over half of Hispanic children have at least one parent
who is an immigrant. The foreign-born in the U.S. makes up 12 percent of the total population,
and almost 40 percent of the foreign-born in the U.S. are from Mexico or Central America. In addition, since we are talking about an
LEP population, this is speaking to the language needs of the Hispanic community, we have 55.5
million people in the U.S. who currently speak a language other than English; 34.1 million
are speaking Spanish. And then, just for California alone, 14.2 million residents speak a language
other than English at home, and 9.5 million speak Spanish, and of that 9.5 million, almost
5 million speak English, and this is all self-elected information. They report that they speak English
less than very well. So when we’re talking about the language needs, we know that this
is actually a pretty substantial segment of the population that has these issues. To give a little bit of background about where
we are today, I’m going to start with some of the structural flaws that existed in the
financial market to get us where we are. We know that there is unequal access to financial
products that are really key to economic success, and, as a result, minorities have routinely
paid more for things like credit, that have often been accompanied by risky terms. So
specifically deficient oversight failed Latino communities and other minority communities,
and those of modest means in the following ways. First, access to prime products was restricted,
even when borrowers had good credit and high incomes, and this most often occurred because
short-term profits were prioritized over long-term gains. For instance, many Hispanic borrowers
have unique profiles that creditors often considered hard to serve. So despite the fact
that sound underwriting models do exist and products exist that can serve these communities,
or consumers with these characteristics, there was little incentive to sell them in the marketplace.
Such models earned issuers little profit, while subprime models had streamlined underwriting
processes and were easy to line with high fees and inflated interest rates. The profitability of the models was also set,
in part, by the price that Wall Street was willing to pay for the risk, so expensive
and risky subprime credit became readily available while affordable and low-risk prime credit
was restricted. In this way, expensive and risky products drove out those that were most
favorable to borrowers, and, as a result, Latino families have paid more for credit
in most market segments. They were 30 percent more likely to receive high-cost mortgages,
nearly twice as likely as white families to have credit card interest rates over 20 percent,
and were more likely to be charged costly markups on their auto loans. The second point is that disparate impact
trends and practices were not properly identified, investigated, and acted upon, and despite
the clear evidence that minority borrowers were paying more for credit and being steered
into subprime credit when they qualified for prime, trends went unnoticed by federal regulators.
Analysts claimed that there was not enough data to take enforcement action against specific
lenders, and, at the same time, research shows that payday lenders, buy-here-pay-here auto
dealers, and other fringe financial providers were clustering in minority communities, so
they really had a prime audience because they were really zeroing in, targeting low-income
consumers. The third point I’ll make on this is that
shopping for credit was nearly impossible for consumers. Many experts pointed to the
growing complexity of credit products, and many reports demonstrated that consumers lack
the information necessary to make sound decisions. Prior to Wall Street reform, credit card,
auto, and mortgage offers were not traditionally transparent, although you can argue that there’s
still a little bit of a ways to go, where that’s concerned, but borrowers were often
unaware of the hidden costs in the loans that they were taking. So few shopping tools have existed that could
help borrowers to create true cost comparisons, and, as a result, many borrowers were foregoing
shopping altogether and were settling for what was presented as the least complicated
product at the time that they needed it. The lack of oversight had serious consequences
for families and local and national economies. The economic recession was driven by predatory
lending and unsuitable mortgage products in the market. This, coupled with the high rate
of unemployment, created the perfect storm for a crisis of the proportion that we saw
begin a few years ago, and that we’re still trying to come out of today. The most recent recession undoubtedly took
a toll on the way that families were managing their finances, and as we move closer to recovering
from the economic downturn, the needs of these communities are great. Unemployment and foreclosure
drained family savings and increased debt, and as we’ve seen in earlier slides, we know
that the racial wealth gap is, in fact, real. Now to talk a little bit, specifically, about
financial access and the way that the community is engaging with the mainstream financial
services market. I’ll talk a little bit about some of the research that shows exactly where
Latinos are. While we know it’s not a silver bullet, owning a basic checking or savings
account at a bank or credit union is fundamental for improving the economic stability for communities
and building tangible assets, which includes a credit history. This is information from
the 2011 FDIC unbanked and underbanked survey of households. I believe that the new research
will be released in about a week or so, so this is current up until that data comes out
soon. But what this is showing is people who are
unbanked, and certain demographic characteristics, and those who are underbanked, and for those
who are unfamiliar with the terms, unbanked means that someone does not have an established
relationship with a bank or credit union, so they don’t have a bank account, checking
account, savings account, and then underbanked is someone who does have that relationship
established but continues to use alternative financial services. What we can see is for the country, as a whole,
8.2 percent are considered unbanked, but when you look at Hispanics, that goes up to 20.1
percent. And then when we’re looking at foreign-born, non-U.S. citizens, that goes higher, to 22.2
percent who are not in the formal financial system. While the numbers of American households who
are considered un- and underbanked has actually been on the rise over the past few years,
we know that this is a problem that has ramifications outside of just where you’re conducting your
everyday financial transactions. Individuals who are carrying cash on them, rather than
in an account, are putting themselves in physical danger. We know that there are institutions
like the Latino Credit Union in North Carolina that was established to specifically serve
immigrant Hispanics in the state, and physical harm was really one of the driving forces
between the decision to establish this credit union, because they knew that people were
being targeted because they were carrying cash. People who lack access to safe and affordable
financial products and services are often left with riskier and often more expensive
financial tools, as I went over a little bit earlier. We know that has led to the decimation
of wealth, because people really didn’t have a lot of options when they were shopping for
financial products that they thought would help get them ahead and stabilize their finances. This is actually also from the FDIC. We see
that people who tend to be outside of the banking system have some characteristics,
like non-Asian minorities, and, actually, when I say non-Asian minorities, I want to
say that sometimes this population, some of the information gets a little bit skewed because
we know that within the Asian population there are many different demographic characteristics,
like home country, language spoken, and these can also affect the reach that they have and
the levels of financial engagement that they have. So I say that with a caveat, and if
you want information specifically on Asian financial engagement, or AAPI financial engagement,
I would encourage you to look at National Capacity, the Coalition for Asian Pacific
American Community Development, and some of the research they have on poverty and financial
engagement, as well. But we know that lower-income households also
tend to be outside of the banking system. We know that people who are not English-speaking
also tend to have some more barriers to accessing products. Unemployed and younger households,
or households who were headed by younger people. NCLR has actually done some original research,
looking at the Latino community. We’ve done two rounds of research. The first one was
actually looking at Latinos in California, specifically, that was done in 2012. A report
was released in 2013. These are some of the findings that we have. People are operating,
in large part, within the formal financial system, but we do have a significant segment
that is not. So we asked people, “What tools are you using, if you’re not using a basic
checking or savings account for your financial transactions? What are you doing?” A lot of
people are using alternative financial services. When we asked people why they were using these
services, even though they might have a bank in their community, or someone in their family
might also have a bank account, what we found was that these were the issues that really
came up to the surface for people when they told us they were using products or tools
or services that were not mainstream. Convenience was a huge factor. Language access—we saw
the numbers for California earlier. We know that a lot of people, the LEP population is
significant in this state, and so language access is important when people are looking
where to bank. Cost. That refers to minimum balance requirements and any fees associated
with a transaction, as well as documentation. We know that there is a significant portion
of the community that is not citizen. They’re not all undocumented but they might be legal
permanent residents who haven’t taken that step to naturalize just yet. And for some people not having a Social Security
number can be daunting, if they think that any interactions they have with an agency
or an official institution might be troublesome for them, or a lot of times word of mouth—they
know someone who has had issues maybe getting a bank account with an I-10. So word of mouth
spreads, and when someone in their network has had a bad experience, it can also keep
them outside of going down that path, too. And familiarity and feeling welcome, which
I would actually tie to the language access issue. A lot of times a customer experience
is very important to this community, so the way that someone is being treated, I don’t
think it’s outrageous to expect to be treated with respect when you go into an institution
that’s supposed to be helping you handle your finances, and you are giving them your money,
literally. So feeling respect is important. So it rose to importance, but I wouldn’t say
that that’s any different, probably, than any other community. Taking off of this research that we did, we
actually were able to expand outside of California and look at a couple of other states. We looked
at Texas, Chicago, Illinois, and we also looked at the metro Miami area, to see what the experience
of Latinos was in those areas, and we also were able to look at not only the Latino community
but also the AAPI community and the African American community. We partnered with National
Urban League and National Capacity, because they also have affiliate or member-based networks
within their organizations. We wanted to answer some research questions around financial engagement
for these communities, as well, looking at low- to moderate-income families, for the
most part. We wanted to know how they were accessing
financial products, what was influencing their choices that they were making, how were they
purchasing daily financial needs that they have, like buying groceries or lunch, and
how were they managing bill paying. We wanted to see what the trends were for all of our
communities and where there might have been some differences, as well. All of that information is actually housed
in a report called “Banking and Color,” and I’ll put the website up if you want to go
a little bit deeper into the findings. I’m not going to go into all of the findings that
we have here today, but just wanted to talk, overall, about some of the trends that we
saw, again, with these research questions in mind. Overall, we saw that there were a couple of
key factors that were influencing the way that families and communities were engaging
with the financial mainstream. We saw that employment, citizenship, and language spoken
really were key to the way that families were engaging with the financial mainstream, and,
again, this isn’t wildly different than what we saw from the FDIC’s research. But we know
that some of the families that we have access to, through our CBO networks, are not always
the same families that are included in some of the national-level studies, and so our
CBOs actually have access to families maybe who were left outside of some of that research,
because of language access, or for a number of other demographic characteristics that
are common throughout our communities. We’ve looked to this to see that some of these families
that we were able to reach are sometimes left out of some of the other data. For that reason,
we think that this is helpful research. This is, I think, one of the more interesting
charts that we have. This is showing, again, the priorities that people have given us as
their top-five ranking for when they select a financial institution. So when we asked
people, “Where is it that you want to bank?” “What is it that’s important to you?” we gave
them a list of maybe 15 or 17 choices, and these were the top five. What we see is that
they were the same for the different communities—Latino, AAPI, African American—and then we saw a
little bit of difference when we went into language spoken, and then when we were looking
at our non-citizens, as well. Distance, proximity, convenience is key for all of the communities
that we looked at. The number of branches, so, again, convenience, location is still
important to people. We saw that fees and requirements, so pricing
is also something that people are sensitive to. And then, again, customer service and
communicating in language was really important. It made it to the top five for these communities.
And then when you look at AAPI, for instance, that was even more important, the ability
to communicate in someone’s native language. And when you looked at non-citizens, it was
very close to that, as well. And then, by specific languages, the Asian language community,
that was one of the highest ranking for them, as well. So I just think this helps us paint a picture.
These are three very distinct communities. What unites them is that they are LMI communities.
So when you’re looking at solutions that can help target these populations, I think that
these are some of the key influencers to keep in mind. Again, if you want some more data,
it is housed in our report. We asked people about the financial tools
that they were using. Maybe not surprising cash was still the most widely used tool for
buying groceries and for bill pay, as well. For a lot of the communities that we looked
at, when we looked at the non-citizens and for those for whom English was not their first
language, it was also the most heavily used tool, as well, which we thought was interesting.
But we talk about financial services and products, financial information is also something that
I think, while not tangible, it’s something that is very important to this community.
We’re talking about debt and credit, and what helps people make decisions about these transactions
that they’re going to be having is financial information and advice. So we asked people if this was a service that
was important to them. They said yes. We saw differences where people were able to access
this kind of information by a couple of these different characteristics here. We saw that
for people who had attained higher levels of education, they were more likely to go
to a professional advisor for this information. What we saw was that people tended to stay
within their familial networks, so friends and family was the number one choice that
people would select when asked if you had to seek financial advice, where would you
get it, which is good that you do have someone in your network who is able to give you this
information, but does that person have the best information? I mean, if that person made
a bad choice, are they also going to give you the same advice? So what we need is to make sure that someone
has information that is not biased, and that someone is not going to be making money off
of the information they’re trying to give you. What we see is that a lot of our lower-income
families and communities of color have limited options when they’re looking for this kind
of financial information and advice. Again, we saw, by income, it varied widely, where
people were able to access that information. Another research project that I think could
be of interest to this group is that Demos, which is another policy think tank, has recently
released a couple of reports focused specifically on credit debt and various communities. So
they have a report that they released with the AARP that looks at senior Americans. They
have a report that looks at the experience of African Americans, that they released with
the NAACP. So they had a survey of households in 2012, low- and middle-income households,
looking at credit debt, and they recently partnered with NCLR for a report that will
be released in the next week or two, that’s looking at credit debt for the Latino community. What they found was that those without debt
were better situated to weather the economic downturn. What that means is that people who
did not have debt, compared to households that did carry credit debt, were likely to
have more stable jobs, their housing wealth was more reliable, and they were less likely
to actually be supporting other people at home, so they were less likely to have older
adult children living at home with them. They also founded that indebted households were
likely to forego medical care at twice the rate than people who did not have credit debt.
I think that’s a pretty big finding. Households without debt also had more assets, so they
had more savings, they had homes that were worth more, and they had more equity in their
homes, as well. And then for Latino-specific data, which,
again, more detailed information will be provided in the report that will be released, they
found that Latinos were more likely to be carrying credit card debt, specifically as
a result of not having medical insurance. So hopefully the passage of ACA, the Affordable
Care Act, would take care of this, and even though more people might be insured, the ramifications
of this—this is a trend that they saw over a number of years—it’s probably going to
take the community quite a while to really get out of that. So we know that medical debt
is still going to be significant for the Latino community in the years to come. But one silver lining in this is that the
passage of the CARD Act is also something that the report looks at, and they saw that
Latino families, specifically, actually had been benefitting more, or thought to be benefitting
more as a result of the policies that were put forth by the CARD Act, so regulation is
good. And if you want more information on any of
the reports that I referenced, we have the California-specific report, then we have the
three communities that we looked at most recently—those are the websites—and then the DEMOS and
NCLR report will be released within the next 2 weeks or so. So, thank you. [Applause.] Thank you, Marisabel. We’re going take a short
break and be back here at 10:25, because we’ve got a great panel, led by Maricela Segura
from my office here at the FTC in Los Angeles. I also want to say, for the next panels, we
are going to be handing out question cards, so you can write your question down for the
panels. Chris Koegel over there, from the FTC, will be handing them out. Okay, back at 10:25.

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