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The CFPB has announced that it will address racial issues and play an active role in addressing issues of pervasive racial injustice and the long-term economic impacts of the COVID-19 pandemic on consumers. On April 28, 2021, the CFPB issued a Press release announcing that it has analyzed county-level demographics from racial disparity complaints. In addition, on June 3, 2021, Acting Director Uejio published this video discuss CFPB’s intentions to take action against racial injustices towards consumers.
Where does it come from?
While the complaint form linked in the CFPB press release does not state the specific reason for the CFPB’s focus on race, it notes that the CFPB has received over 700,000 consumer complaints since the declaration of the COVID-pandemic. March 19, 2020.
The video linked above provides additional insight. At the start of the video, Acting Director Uejio is of the opinion that “Our nation is in the middle of a long overdue conversation about race.” Then, after citing his personal experiences with racism, mentioning the widely publicized racial issues that have taken place over the past year, and noting that other members of the board know what it is to be faced with. discrimination, Acting Director Uejio unequivocally states that the CFPB “works hard to protect all consumers from discrimination. The video ends with a pledge from Acting Director Uejio that “CFPB will take action against institutions and individuals whose policies and practices prevent fair and equal access to credit or benefit poor, underserved and disadvantaged communities “.
How did the CFPB analyze the data and what did it show?
Although the CFPB does not collect information on race and ethnicity as part of the complaint process, consumers provide their mailing addresses. To assess the communities that filed the most complaints, the CFPB used race and ethnicity estimates from the U.S. Census 2019 American Community Survey coupled with the consumer’s mailing address to aggregate each of the more than 3,000 counties in the United States. United in five distinct categories. The categories were 1% -20% minority, 21% -40% minority, 41% -60% minority, 61% -80% minority and 81% -100% minority. The CFPB has called counties where minority populations (non-white or Hispanic) make up more than 61% or more of the total population as “majority minority counties”.
According to CFPB’s analysis, it received more complaints per capita from consumers living in minority counties, and the largest rate of increase between 2019 and 2020 was from minority counties. These results did not change depending on the product line; all product lines, including credit reports and debt collection, have followed these trends. Additionally, from 2019 to 2020, complaints grew at a higher rate in predominantly minority counties than in predominantly white, non-Hispanic counties.
The graph below shows the percentage increase in the volume of complaints by minority volume category, indexed to the average of complaints for 2018.
Regarding the analysis, CFPB Acting Director Dave Uejio said: “Consumer complaints support and inform the work of CFPB and provide key information on emerging trends in the financial market. … Today’s report shows that although everyone across the country faces financial hardship, a significantly higher complaint rate comes from ethnically diverse communities. The data raises concerns that merit our further study and as such we will keep a spotlight on any trends or abuses we see. “
What will the CFPB do?
To explore these issues and attempt to understand the experiences of various communities in the consumer market, CFPB plans to improve the consumer complaint form to allow consumers to enter information on household size and income. The CFPB will also explore additional demographic information that may be appropriate to collect through the complaints process, such as race and ethnicity. The CFPB believes these improvements will help them better understand who files complaints today and how that changes over time. Additionally, CFPB expects this work to help illustrate the consumer credit life cycle, from origin to collections and credit reports, in order to understand the diverse experiences of consumers in the marketplace.
InsideARM perspective:
Although the complaint bulletin acknowledges that the demographic analysis at the county level provides only a “high level overview” and has certain limitations, it appears that the CFPB considers its analysis to show a trend. We don’t yet know exactly what that means for those working in the accounts receivable space, but when CFPB says it will pursue a specifically targeted initiative like this, entities that interact with consumers should lend a helping hand. Warning. We will bring you more information on this emerging CFPB initiative as it develops.
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