Public Symposium on Capitol Hill Focuses on Acute Credit Needs

Finds Low and Moderate Income Consumers Need More Options for Securing Credit in Emergencies

Sep 21, 2011, 17:50 ET from Competitive Enterprise Institute

WASHINGTON, Sept. 21, 2011 A public symposium examining the desperate needs of unbanked and underbanked consumers, who have been dramatically affected by the economic downturn and find themselves with few options to secure emergency funds, has served to focus national attention on a problem facing millions of Americans just two days before a Capitol Hill hearing on the same issue.

The forum, sponsored by the National Urban League, the National Bankers Association, the Competitive Enterprise Institute and the Hispanic Leadership Fund, examined the credit crisis faced by low and moderate income Americans in an in-depth, day-long discussion informed by a new study showing half of all Americans unable to raise $2000 to meet emergency needs.

Michael Grant, President of the National Bankers Association and a symposium sponsor, told the audience he grew up in Nashville, Tennessee, one of 17 children in a family headed by a single mother. "Let's face it. We still have millions of very poor people who need emergency funds and can't come to banks because of the strict regulating criteria. The need has got to be filled, and we all need to figure out how to do it without pointing fingers at each other."

The public forum offered economists, community groups, consumer activists, researchers and representatives of the financial services industry an opportunity to exchange information and strategies for solving this consumer credit crisis two days before a U.S. House Financial Services Subcommittee is to hold a hearing on legislation aimed at expanding opportunities to secure credit for the unbanked and underbanked. Four panels of speakers addressed credit availability; issues surrounding the cost of credit to consumers; the regulatory structures of banks and credit unions; and possible solutions for consumers with limited availability to credit.  

Panelist John Berlau, director of the Center for Investors and Entrepreneurs at the Competitive Enterprise Institute, expressed support of the approach of HR 1909 (FFSCC Charter Act of 2011) sponsored by Rep. Joe Baca (D-CA). The bill proposes easing financial services regulations to offer more options to low and moderate-income borrowers. The bill also calls for the creation of a new banking charter for institutions such "payday lenders" that would allow them to offer a broader range of products and services, as well as financial literacy education.  

"Alternative lenders, like the payday loan industry, are offering competitive options and choices and policymakers should recognize that," Berlau said. "Congress and the President should cut red tape that is driving up costs for borrowers and preventing banks, credit unions and non-bank lenders from offering products to better meet consumers' needs."  

Of particular concern to the symposium's sponsors were the findings of a study presented by one of the panelists, Dr. Joanne Yoong, that showed one-half of all American respondents, when faced with an emergency need for $2000, said they could not secure the critically- needed funds. Yoong, a Rand economist, presented the work of her colleagues at the Financial Literacy Center whose research found that the middle-class respondents, as well as lower-class consumers, show signs of financial "fragility" and half of all the respondents had no funds set aside for emergencies.

Gerri Guzman, President of the Consumer Rights Coalition, told the audience that the ability to get short-term loans from lenders other than banks is vital to low and moderate income consumers faced with financial emergencies. "They can't go anywhere else and they need this money and this service."

The forum also explored strategies for stabilizing consumers' financial situation. Stephen Brobeck, President of the Consumer Federation of America, noted that, "credit itself is not the problem, it is the imprudent use of it." Brobeck championed the idea of promoting auto savings accounts for low and moderate-income families who commit to automatically putting aside as little as $25 a month. "We see many examples of successful savings." He continued, "These accounts will contribute to the financial strength of families, financial institutions, and ultimately, the country."

Discussion lasted more than six hours, and laid important groundwork for Thursday's hearing in the Financial Services Committee. Rep. Francisco Canseco (R-TX), who serves on the Committee, told the crowded room, "Everyone agrees that this is a problem. The big question is, what can be done about it and specifically, what should Congress do? From where I stand, the most important thing Congress can do is ensure that we foster a vibrant financial services industry that offers ample choices to consumers of all levels."

While options and strategies suggested for solving the problem covered a wide spectrum, Michael Grant finished by remarking, "No matter what folks say about us in the big old US of A, it's wonderful that we can have a public discussion about anything, and it's always a good thing when we can find common ground."

*For a webcast recording of the Public Symposium, as well as the speaker's written remarks and power point presentations, go to

SOURCE Competitive Enterprise Institute