In summary
We need strong consumer protection during the pandemic, but the federal government is not going to provide it. So now is the time for California to step up.
By Claudia Deeg, Special at CalMatters
Claudia Deeg is associated with the California Public Interest Research Group, CALPIRG, [email protected].
It has been more than four months since the World Health Organization declared COVID-19 a global pandemic.
Millions of us have lost our jobs, juggle child care at home, or struggle to pay our rent. Payday lenders are viciously targeting desperate consumers with loans at triple-digit interest rates – even as these companies have received billions of dollars in federal aid. ACE Cash Express, a payday lender, has been cited by the Consumer Financial Protection Bureau for using illegal debt collection tactics, and two other California companies have marketed these loans to California consumers.
One would hope that in the midst of this crisis, the government would do everything in its power to protect consumers. Last week marked nine years since the opening of the Consumer Financial Protection Bureau. The bureau was created as a financial watchdog and generated nearly $ 12 billion in consumer aid in its first six years. This agency should work to prevent predatory companies from using the pandemic to exploit desperate Americans.
However, the Trump administration has gutted the Consumer Financial Protection Bureau in recent years, and the office recently rolled back critical payday lender regulations at a time when consumers need those protections most. A new report from the US PIRG Education Fund has found that consumer complaints to the bureau have set a new record every month since the start of the COVID-19 pandemic in March.
We need a strong consumer watchdog to protect us during the COVID-19 pandemic, but the federal government is not going to provide one. So now is the time for California to step up.
California needs to create its own consumer protection agency, and this year we have the opportunity to do so. Gov. Gavin Newsom has proposed creating the Department of Financial Protection and Innovation, a new agency that would protect consumers from threats, including aggressive debt collectors, loan sharks and crooks.
The governor’s proposal would transform the Department of Business Supervision and establish the Department of Financial Protection and Innovation as a regulator with expanded oversight of businesses, including debt collectors and credit bureaus. . In many cases, the Department of Business Oversight, California’s current regulatory body, does not have the authority to enact rules and enforce state laws against companies using unfair, deceptive and abusive practices. .
We can’t wait any longer. Stricter consumer protections were needed in California before the COVID-19 pandemic, but the increase in predatory lending and financial scams alongside the outbreak has made the need for better protections for consumers and small businesses even more critical. . Unfortunately, this proposal was left out of the original budget passed in June, but lawmakers can still act on the issue in August.
Experts say California’s economy is unlikely to return to pre-coronavirus levels in the next three years. This means three more years of unprecedented financial stress for consumers and an uncertain outlook for small businesses. If we fail to establish the strong consumer protections necessary to protect Californians, we will only prolong this crisis and leave more people in dire straits.
We urge Newsom, Pro Tempore Senate Speaker Toni Atkins, Assembly Speaker Anthony Rendon, and all California state lawmakers to fund the creation of the Department of Financial Protection and Innovation in the 2020-2021 budget. . The economic pain caused by this pandemic is not going to end anytime soon, so we must do all we can to care for and protect Californians.
