"Economic rights are civil rights." That was the theme of Consumer Financial Protection Bureau Director Richard Cordray's address Tuesday to the NAACP national convention in Cincinnati.
The former Ohio Attorney General says his agency is cracking down on three key business practices that disproportionately affect African-Americans and people of color. They include redlining, discrimination in auto lending, especially discretionary dealer mark ups, and high-cost payday loans.
Redlining
"Redlining is no longer legal, but nor has it vanished," says Cordray.
Redlining is the practice of using a loan applicant's address as way to determine if their request should be granted. Historically, minority neighborhoods were circled in red and labeled undesirable.
Cordray points to a recent, $10 million settlement with Bancorp South. The Justice Department and the Consumer Financial Protection Bureau charged the bank with systematically discriminating against African-Americans in certain Memphis communities.
Redlining has led to banking deserts and African-Americans and Latinos being "shut out of mainstream credit markets," says Cordray. He says a study of last year's numbers shows 26 million Americans have no credit history.
"We call this 'credit invisibility.' We found that the share of African-American consumers who are credit invisible is almost 50 percent higher than for non-Hispanic whites."
Cordray adds, "If you cannot access credit, it becomes nearly impossible to build wealth."
Auto Lending
According to Cordray, auto dealerships often use a practice known as indirect auto lending whereby a dealership offers the finances and then sells the loan to bank. The financial institutions then authorize the dealers to charge higher interest rates that aren't based on credit-worthiness, and pocket the difference.
"Our extensive research research has indicated that unfettered discretion in pricing the mark-up on loans frequently leads to African-Americans and Hispanics being charged higher rates than white customers in similar financial circumstances."
Payday Lending
The NAACP has long been concerned about payday lending, especially the disproportionate number of payday lending institutions built in African-American or low-income neighborhoods.
"Almost four in five loans is re-borrowed within a month," says Cordray. "About one in four borrowers slides unavoidably into a sequence of at least 10 loans, taken out in an increasingly desperate, and often futile, bid to stay afloat."
Cordray says the agency is supervising payday lenders to make sure they follow the law. It's also pushing for a new rule that would "require lenders to determine whether borrowers can actually afford to pay back their loans before they are made. Imagine that."
Vice Presidential Aspirations
Cordray's speech to the NAACP convention comes just a day after Democratic presidential hopeful Hillary Clinton addressed the organization. Clinton has yet to name her vice presidential pick and Cordray's name has been bandied about as a possibility. When asked about this prospect, Cordray replied, "I can't comment on any of that."
