What consumer debt in Oregon tells us about the potential of “mini CFPBs”

With rising costs of living and stagnant wages, it might come as no surprise that nearly 80% of American workers say they’re living paycheck to paycheck. Some cash-strapped households find that credit cards can be useful for paying bills—but only if the resulting balance is an amount that can easily be paid off without the borrower accruing additional debt. Such borrowers are known as “transactors,” or people who use their cards for routine purchases and pay off the balances each month.

However, most cash-strapped individuals fit into another category known as “revolvers”—people who carry over balances on their credit cards, resulting in interest charges each month. Revolving credit lines can lead to debt traps for low-income borrowers who “generally experience much higher credit card and other fees, including initiation fees, monthly fees, and overdraft fees.”

But what happens when borrowers pay off their debt… and continue to receive calls from collectors saying they still owe money?

A new survey from the Center for Responsible Lending found that 1 out of every 3 low-income Oregon residents said they’d been contacted by a debt collector. Of those respondents who said they had been contacted by collectors, nearly 30% found mistakes in their debt records. Practices like robo-signing—when the person signing the affidavit has no personal knowledge about the underlying facts and has not reviewed relevant files—can lead to people paying down “debt” they don’t owe, disproportionately impacting working-class borrowers.

These survey results demonstrate one of the many reasons why we must protect and strengthen the Consumer Financial Protection Bureau (CFPB), a regulatory agency that has returned more than $12 billion to consumers since its inception in 2010. Under Trump’s presidency, the CFPB has seen an increase in efforts to undermine its power. Economic justice and financial reform organizations have been advocating for those in power to #DefendCFPB, and earlier this year, Pennsylvania Attorney General Josh Shapiro announced plans to launch a “mini-CFPB” unit to better protect Pennsylvania residents in the face of these attacks on consumer protections. A small number of other states, including New Jersey, have announced similar plans to create so-called mini-CFPBs.

In December, the Attorney General of New Jersey announced the state has entered into a settlement agreement related to robo-signing, following a multi-state investigation.

Is this multi-state investigation and the resulting settlement an example of how mini-CFPBs can help protect consumers?

What role can consumer protection government agencies that are already in existence play, when it comes to protecting low-income communities from predatory lending in the absence of a strong CFPB?

Let us know your thoughts in the comment section!

Symone is Beneficial State Foundation’s Digital Engagement Manager based in Oakland, CA.

This blog post reflects the author’s personal views and opinions, and does not represent the views and opinions of Beneficial State Bank and/or Beneficial State Foundation.