Smith’s story is one of many that Chicagoans shared with Professor Elizabeth Warren last Wednesday. Professor Warren, who was appointed by President Obama to stand up the Consumer Financial Protection Bureau (CFPB), was invited by National People’s Action to learn about the challenges Chicagoans face and our ideas to make the financial system a safer place for consumers to borrow, save, and invest in their future. Professor Warren heard from families who faced hardship when a loved one fell sick or incomes were cut and ended up with a seemingly insurmountable mountain of payday loan debt, for example, or could not get their banks to work with them to avoid foreclosure.

National People’s Action agreed on a set of reforms that would help people like Shani Smith. Our Vice President Tom Feltner and Adam Gross of Business and Professional People for the Public Interest presented ideas to reform the payday loan industry and the foreclosure process.

Advocates in Illinois and across the country have worked for decades to pass a uniform usury cap for consumer loans like payday loans and have made significant reforms to the industry. By law, the CFPB is prohibited from instituting an interest rate cap; however, the agency has authority to make other far-reaching reforms that will help every borrower who walks into a payday loan store. Feltner asked that the CFPB prevent the destructive cycle of debt by:

-Limiting the number of payday loans a borrower can have out at one time;

-Requiring that lenders limit the amount of money lent based on a borrower’s ability to repay;

-Limiting rollovers so that short-term loans stay short-term;

-Mandating a free repayment plan for borrowers struggling with unaffordable balloon payments;

-Enforcing consumer protection laws regarding lending to military families.

The foreclosure crisis has devastated the Chicago area by destroying home values and destabilizing once-solid neighborhoods, and there are still barriers in place that threaten a recovery. Adam Gross presented a number of ways that the CFPB can improve the foreclosure process. Gross emphasized that mortgage loan servicers must make every effort to put distressed borrowers in permanent and sustainable loan modifications through a transparent decision-making process that gives homeowners an opportunity to appeal. Gross urged that the foreclosure process should not start until all loan modification options have been thoroughly considered. If servicers fail to meet these standards, they must be held accountable. In order to promote accountability, the data collected by the Home Mortgage Disclosure Act (HMDA) must be expanded so that advocates and regulators can monitor servicers’ performance. New HMDA data should include information on delinquent loans, types of actions taken to prevent foreclosure, number of completed foreclosures, and the amount of principal remaining after a foreclosure sale takes place.

Professor Warren welcomed the input from community leaders, saying that the CFPB is reaching out to consumers across the country to find the best ideas to incorporate into the agency. You can share your consumer protection suggestions with the CFPB in a number of ways, including this online form, Twitter, Facebook, and video suggestions.

{flickr-album}Type=Photoset, User=48923005@N07, Photoset=72157626137234102{/flickr-album}