Academic journal article Law and Contemporary Problems

Consumer Credit in America: Past, Present, and Future

Academic journal article Law and Contemporary Problems

Consumer Credit in America: Past, Present, and Future

Article excerpt

We began organizing this symposium at the start of 2016 with the recognition that consumer credit and financial services were in a state of flux prompted in significant part by the Great Recession. (1) The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) brought with it the Consumer Financial Protection Bureau (CFPB). (2) The CFPB's creation marked the most significant moment in modern American consumer law. (3) Consumers gained an advocate charged with protecting them through researching, monitoring, and regulating the providers of consumer financial products and services, enforcing federal consumer financial protection laws, and, as importantly, empowering consumers. (4)

Since its creation, the CFPB has tackled debt collection, (5) mortgages, (6) payday loans, (7) prepaid debit card accounts, (8) and student loans, (9) among other products and services. (10) It has processed over a million consumer complaints. (11) Its supervisory and enforcement actions routinely make headline news, and, at the five-year mark, have collectively returned more than $11 billion to consumers. (12)

At the same time, Congress, states, and municipalities have also taken significant action to regulate and police providers of consumer financial products and services. The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, (13) which mandated changes in credit card underwriting, has helped consumers avoid more than $16 billion in credit card fees since its enactment. (14) Several states have passed legislation aimed at curbing the payday and auto-title lending industries. (15) And when other states failed to enact substantial legislation to reform payday lending, municipalities around the nation stepped up to enact ordinances of their own that limit expansion of these lenders into their borders. (16)

Much like the law, the consumer credit business itself is rapidly changing. Technological innovations have fundamentally altered the ways in which

people access credit and financial services. Mobile pay and banking are becoming mainstream, leaving more and more banking deserts in the physical world, as opposed to in the virtual one. (17) Even the providers of alternative financial products like payday loans are abandoning the brick and mortar locations that had once filled the voids left by disappearing banks, and increasingly are selling their products online, where studies suggest they can make more money. (18)

Other consumer credit profit centers likewise have shifted, and businesses are adjusting their product offerings in accordance. The housing bubble led to a decline in subprime mortgages, only to be replaced with subprime auto loans and fears that these loans are fast creating a new bubble as lenders package them into securities similar to subprime mortgages. (19) Subprime auto loans come with a proliferation of a new take on rent-to-own stores: "Buy Here Pay Here" used-car dealerships. (20)

Although the potential for exploitation is manifest, technological advances and changing markets also bring the promise of increased access to credit and banking services for underserved populations and others in need of short-term help. With the approach of the decade mark since the beginning of the Great Recession, and all that has occurred since, we felt it was time to assess the state of consumer credit in America--to review and examine its recent history, to consider arguments for and against regulation, and to discuss the potential for future innovation. The articles published in this symposium collectively highlight concerning practices, predict trends, find hope in new practices, and remind us of how far we have come and how far we still need to go to empower consumers.

In Prosecuting Creditors and Protecting Consumers: Cracking Down on Creditors that Extort via Debt Criminalization Practices, Creola Johnson documents how creditors use the criminal justice system to coerce debtors into paying their civil debts, argues that these practices constitute prosecutable extortion, and offers solutions to regulate "debt criminalization tactics. …

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