Access to credit affects our lives in all kinds of ways – a solid credit score is needed to purchase a home, credit can keep a business running, help buy a car and deal with all kinds of expenses.
Financial institutions and consumers navigate a variety of regulatory issues and guidelines that go well beyond pulling out your credit card.
Advocating for Americans’ access to credit
Bill Himpler, president and CEO of the American Financial Services Association (AFSA), noted that AFSA has a long history related to personal finance and credit issues.
The American Financial Services Association has been around for over 100 years.
“We were actually created in conjunction with some consumer advocates to make sure that we had a sustainable credit product for millions of Americans,” Himpler says, noting that can cover everything from financing a mortgage to getting a favorite credit card.
He says AFSA is dedicating to “making sure that consumers have access to affordable, responsible credit that they can understand and utilize to their benefit.”
Access to credit is now always a constant, however.
A survey released last September year found that nearly 60 percent of respondents felt that getting credit was harder to obtain than it was the previous year.
The concern about getting access to credit was at the highest level than it had been in more than a decade.
Concern about CFPB regulation
The Consumer Financial Protection Bureau (CFPB) was established to help protect consumers and ensure they get fair treatment from banks, lenders and financial institutions.
But some members of Congress, as well as AFSA, are concerned about the direction of the agency. They worry that vague regulatory requirements can ultimately impact consumers as they deal with rising monthly bills, as well as higher prices at the grocery store and gas station.
Himpler says his organization supports efforts in Congress and from the CFPB to try to make sure consumers understand their credit options what the requirements are.
But he also points out that CFPB was created in 2010 and in his group’s view has had “very little oversight.”
Himpler calls it “regulation by press release.”
“We stand shoulder to shoulder with them in terms of (their) mission,” he says, “But trying to figure out where the lines are, how to be in compliance with regulations, when things can change and (when) we have to read tea leaves is really not in anybody’s best interest.”
What constitutes credit risk?
One of the issues that’s created some confusion is the issue of risk.
Himpler says since the CFPB was created under the Dodd-Frank Act, the definition of what constitutes risk to consumers has never really been adequately defined.
So AFSA worked to get Congress involved.
“We actually had something that never happens in Washington these days,” he says. “We had a bipartisan effort, a letter going from the House Financial Services (Committee) earlier this year, that called on the bureau to actually define what they mean by risk – risk to the consumer, risks to the taxpayers, risk to companies that are extending credit risk across the board.”
Himpler says financial institutions are willing to comply with federal guidelines, but they must be more clearly spelled out.
“It’s literally like being pulled over for speeding, and there’s no speed limit posted,” he says. “How are you supposed to know if you’re following the speed limit or not? It’s just not fair.”
A role for regulation
Consumer advocates have pointed to a variety of issues involving credit, noting that consumers need to be protected. Many homeowners, for example, were left underwater during the financial meltdown in 2008, after getting questionable loans.
Himpler says regulation is important and necessary.
“We firmly believe that there’s a role for a regulator to play,” he says. “But…both the regulator and the regulated need to know what the rules of the road are, so that there can be some fair judgment in the process.”
He says AFSA supports efforts to make matters transparent.
“I think at the end of the day, whether it’s truth in lending, or the Equal Credit Opportunity Act, or the fair lending, all of them have regulations, all of them have disclosures, they’re fairly straightforward,” he says.
“If there are improvements that need to be made, we’re happy to work with that,” he adds.
But he says adding on “countless disclosures” that aren’t clearly spelled out doesn’t help anyone.
Working with Congress and consumers
Himpler says many lawmakers in Congress appear to have an appreciation for the need to have rules of the road.
He says CFPB can put forward regulations they want to implement, but there needs to be formal rulemaking and “an opportunity for all stakeholders to comment on that, be it my member companies, policymakers, consumer advocates, consumers themselves.”
Regulators should get feedback on the potential impact of their proposals, he says.
“We are a credit-driven economy,” he points out. “Everybody needs access to credit. We’re an industry that’s dedicated to providing affordable means for credit.”
He says AFSA wants to work with regulators and Congress to make sure things are affordable, transparent and responsible.
“And we think the best way to do that is through regular rulemaking authority,” he adds.
As for consumers, Himpler notes some people have pristine credit ratings. Others are somewhere in the middle, will still others are struggling due to problems in the past.
Still, he believes there is a credit product for everybody.
“If you’re behind in payments, call your creditors – reach out, folks want you to succeed,” he says.
