Letter: US reforms should help financially vulnerable people
Updates to the letter
Sign up for myFT Daily Digest to be the first to know about Letter news.
Your article says that US President Joe Biden hired Rohit Chopra to lead the Consumer Financial Protection Bureau (“Battle Looms for Sub-Risk Loan Regulation under Biden,” Inside Business, February 9).
As you point out, Chopra has “spoken out against what he sees as predatory lending practices, in areas ranging from education funding to payday loans.” Now activists will pressure Chopra for a multitude of these financial reforms and he will likely want to satisfy them with swift and bold action.
I think we can all agree that a government body like CFPB should work for consumers.
Still, it’s important to understand that while reforms in some areas can help consumers, other “reforms” could increase the hardship for ordinary Americans.
For example, student loan reforms could help consumers by making payments more manageable and making it easier to postpone payments in times of difficulty. Yet any reform that tightens or eliminates the small dollar lending industry would hurt underbanked Americans, especially younger Americans for whom the demand for credit is the highest and the supply of credit available is the lowest.
Plus, according to the Federal Reserve, small dollar loans are most useful when consumers experience a financial shock – and the global pandemic has been such a shock.
Rather than doing what seems politically expedient, Chopra must take a balanced approach to ensure that efforts to reform the financial system do not simply make working-class Americans financially vulnerable.
Domestic Policy Caucus
St Paul, Minnesota, United States