BY DFS SUPERINTENDENT LINDA LACEWELL & ASSEMBLYMEMBER TREMAINE WRIGHT
This week, we were reminded of Dr. King’s fearless struggle against injustice in his quest for civil rights, which included attaining economic justice for all: “Injustice anywhere is a threat to justice everywhere.” His words ring as true today as they did when he wrote them from a Birmingham jail cell in 1963.
Two weeks ago, during Gov. Andrew Cuomo’s State of the State address, we heard about New York’s successes — including how raising the minimum wage has lifted 380,000 New Yorkers out of poverty and investments in all corners of the state have resulted in unemployment falling from 8 to 3.7 percent. Recognizing this accomplishment, the governor continued, “Our economic growth would be a hollow victory if we did not continue our social progress.”
As members of New York’s legislative and executive branches, it is our joint hope this upcoming legislative session to continue the last decade of social progress by implementing the sweeping consumer protection measures that the governor outlined in this year’s agenda, from bringing much needed oversight of New York’s debt collection industry to expanding financial inclusion in every community in the state, and reforming New York’s laws to help state government better prevent abusive and deceptive practices.
This agenda is more than just a consumer protection agenda — it is an economic and racial justice agenda that focuses on alleviating historical disparities and injustices that for too many years have resulted in communities of color being denied access to our financial system, targeted by predatory lenders and victimized by perpetrators of deed and mortgage fraud, and holding a disproportionate share of student loan debt.
The statistics paint a startling and disturbing picture.
• Access to financial services: Approximately 25 percent of New York households have limited-to-no access to banking services. Neighborhoods with high percentages of unbanked households are found in the Bronx and Brooklyn, with the Bronx having the lowest concentration of bank branches per household of any county in the United States.
• Lending: African Americans are 105 percent more likely and Hispanic Americans are 78 percent more likely than white Americans to use a high-cost mortgage. Non-white applicants, despite being as qualified or more financially qualified than white applicants, are offered higher priced car loans, adding on average an additional $2,662 in costs, 60 percent of the time.
These more expensive products with worse terms for borrowers, including higher interest accrual and the assessment of fines and fees, lead to higher rates of default and widen existing wealth disparities.
• Debt collection: When struggling families default on costly loans, debt collectors pounce. Communities of color are disproportionately impacted by debt collection with the judgment rate in debt collection lawsuits being 40 percent higher in black neighborhoods than in non-black neighborhoods.
• Student debt: Ninety percent of black students carry student debt, with default rates that are five times those of their white counterparts. For women of color, particularly black women, this problem is even worse, with African-American women accruing on average over 50 percent more in educational debt than white men.
These statistics are not the result of a recent phenomenon. They are the result of years of systemic injustice. Too often, our most vulnerable New Yorkers have been locked out of a financial system that would uplift our communities, becoming the target of predatory businesses and abusive products that further exacerbate the injustice.
If we are serious about fighting for Dr. King’s message of social, economic and racial justice, we must advance this agenda and it must be done in this year’s budget.
With the federal government retreating from its duty to enforce consumer protection laws, we will act to strengthen the ability of state authorities to protect New Yorkers from abusive, deceptive and unfair practices.
We will fight to give DFS the same consumer protection capabilities that the CFPB and other federal regulators have, but under the Trump administration have declined to exercise, enabling the state to step up and protect the most vulnerable from the predatory practices that have proliferated over the last few years.
For example, DFS needs the proper tools to pursue the deceptive practices that have caused widespread deed fraud in Brooklyn, Queens, the Bronx and Harlem, where homeowners are misled into signing documents that transfer their property to a predatory entity seeking to defraud the homeowner.
Under current law, DFS must prove the corporate entity engaged in ‘intentional’ misrepresentation or fraud — a high bar that too often limits state government’s ability to ensure restitution for the victimized party.
While the U.S. is the world’s largest economy, only 57 percent of American adults are financially literate, ranking the country far below other developed nations and leading too often to poor financial decisions that can cause a lifetime of hardship.
That’s why, together, we will fight this year to create New York’s first statewide Office of Financial Inclusion and Empowerment to meet the financial services needs of low and middle-income New Yorkers, ensuring all residents of our state have access to financial services counselors for housing issues, student loans and consumer debt, and to promote financial literacy.
Thirty-one percent of American adults, including 23 percent of New Yorkers, have a debt that is subject to collections, with 31 percent of borrowers in predominantly non-white communities holding debt in collection, compared to 19 percent of borrowers in predominantly white communities.
Together, we will fight to give the Department of Financial Services the ability to license and regulate debt collection companies to crack down on unscrupulous practices.
It’s expensive to participate in the mainstream financial system if you’re poor. Overdraft penalties and banking fees prevent too many families and individuals from accessing the most basic financial tools like savings accounts and lines of credit.
Together, we will fight to create the Excelsior Banking Network, which will increase access to capital and small dollar loans in underserved low-income communities across the state and expand access to affordable financial services.
Together, we will correct injustice wherever we find it and continue Dr. King’s fight for social, economic, and racial justice.
Linda Lacewell is superintendent of the New York State Department of Financial Services, and Assemblymember Tremaine Wright is chair of the Black, Puerto Rican, Hispanic & Asian Legislative Caucus.