George Bailey would have liked the CFPB
A real-life banker for the middle class explains why we need strong, fair regulations to rein in today’s Mr. Potters.
George Bailey, the protagonist in the classic film “It’s A Wonderful Life,” would have liked the Consumer Finance Protection Bureau.
His real-life “twin” told me as much.
Peter Krajsa, one of my best childhood friends, was raised to be a banker for the middle class.
His father, a dignified community leader, preferred to be referred to as a “consumer lender.” He aimed to distinguish himself from banks that handled big home mortgages or business loans. And he wanted no association with the loan sharks who preyed on the desperate.
Like George, the scrappy banker of Bedford Falls, Peter learned the ropes of his father’s business, eventually inheriting the company. He also married his sweetheart, has multiple kids, still lives in his hometown, and may have a guardian angel.
He continued his father’s policy of providing personalized service and consideration to people who felt out-of-place at the big downtown banks.
But Peter eventually decided to distance himself from that business.
Chalk some of it up to boredom.
Chalk some of it to discovering a new line of business, fulfilling an unmet demand.
You see, an increasing number of homeowners and small businesses wanted to make their buildings more energy-efficient, better weatherized. (Remember George Bailey renovating the abandoned house into which he moved with his bride?) But, if they tried to buy the materials, the financing options were high-interest credit cards and outrageous teaser financing. (Think 0% interest for six months and 32% thereafter.) And they were too often steered towards fly-by-night contractors for installation.
So, Peter became one of the first lenders in the country to offer fixed rate, longer-term “point of purchase” financing for work performed by a network of financial and ethically stable contractors. Think car loans through reputable dealers.
(He was able to do so, in part, due to the creation of a state-backed revolving fund for those purposes, for which PennPIRG was an early advocate.)
And, while Peter was interested in helping the environment, he was also concerned about the changing nature of the consumer lending business.
As Peter describes it, large national banks — playing the role of “It’s A Wonderful Life’s” greedy villain Mr. Potter — started essentially renting their charters to storefront companies, such as Check City and Allied Cash. They used their patrons’ exemptions from state regulation and ability to charge higher interest rates to cut prices and jack up cash advance fees. They bet — accurately — that many people would give up personal service for what they thought were better deals.
But while some customers did get better deals, many got hosed. Too many of those “payday lenders” didn’t take responsibility for their customers/neighbors like Peter’s family business had for decades.
Federal lawmakers took notice. In 2010, as part of the response to the Great Recession, the U.S. Government established the Federal Consumer Financial Protection Bureau (CFPB), which began its work a year later. In part, the CFPB is designed to help borrowers avoid getting ripped off by lenders, big and small.
Despite accusations from unscrupulous companies and their lobbyists, the CFPB wasn’t created to be anti-business. Part of its mission is to give finance companies a fair shot at success if they play by the rules, respond to their community’s needs, and aim to do more than just make a quick buck off the overburdened, the confused, the gullible, and the frantic.
Contrary to that mission, the interim director of the CFPB, Mick Mulvaney, seems to have introduced a new goal for the Bureau: letting payday lenders off the hook.
In just the past couple of months, the Bureau announced that:
* It had dropped a long-standing investigation into a major payday lender, World Acceptance Corporation, which according to the National Institute on Money in State Politics, contributed $4,500 to Mulvaney’s Congressional campaigns during the past five years.
* It would stop numerous other investigations of payday lenders, and reorient the Bureau’s mission to “better serve” those companies.
Peter doesn’t do “pissed off.” He’s a self-described “radical moderate.” But he knows crony capitalism when he sees it.
He and I went our different ways after high school. We’re best off talking about basketball and Monty Python skits.
But one thing we can agree on is that our country needs strong and fair regulation of financial services. Peter wants a level playing field. He wants a return to personalized service and sustainable economics.
Like George Bailey, he welcomes in the bank examiners who check his financial records.
And he knows that federal government regulation, conducted by an independent Consumer Finance Protection Bureau committed to the mission stated in its name, is critical to a healthy, stable, equitable economy.
It’s the best way to crack down on the grifters, moochers, and Mr. Potters that prey on the little guy and undercut decent family businesses like Peter’s.
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For more information about the effort to stop the evisceration of the Consumer Finance Protection Bureau, click on this link to U.S.PIRG’s “Defend The Consumer Bureau” website.
