The Obama Legacy: Protecting Consumers From Big Banks, Payday Lenders, and Debt Collectors

President Obama’s work on behalf of consumers is a central part of his legacy. When he took office eight years ago, our country was in the midst of the worst financial crisis in generations—a crisis Wall Street built by cheating consumers. Working with Democrats in Congress, President Obama took several important steps to make our financial system safer and to stop the kinds of consumer abuses that paved the way for the crisis. None of those changes was bigger than the establishment of the Consumer Financial Protection Bureau (CFPB).

It was a tough fight to get the CFPB passed into law. As Congress considered whether to create a new consumer agency, the big banks spent more than a million dollars a day lobbying against financial reform. But a grassroots network of people and organizations came together and fought back, and the Obama Administration stood firmly in support of a strong, independent consumer agency. Now, consumers across the country know there’s an agency in Washington that has their back.

In the five and a half years since the CFPB has opened its doors, the agency has consistently delivered for working families across the country. It has returned nearly $12 billion directly to families who were tricked by big banks, payday lenders, debt collectors, and other financial institutions. It has acted aggressively to protect service members and their families from illegal foreclosures and other predatory actions. It has fielded more than one million consumer complaints, helping thousands of people in every state quickly and easily resolve disputes and recover unauthorized fees. And it has cracked down on banks that are ripping off their customers—culminating in the agency’s recent settlement and record fine in the Wells Fargo fake accounts scandal.

The consumer agency also plays a critical role leveling the playing field for working families by implementing new rules for financial products. One notable example is with payday lending.

Payday loans are an enormous problem for families and communities across our country. Too often, people obtain these loans to cover things like care for a sick child or a broken car, but then find themselves trapped in a cycle of debt. Americans now spend over $7 billion each year in fees on payday loans, which can have interest rates of 200, 300, or even 400%. And as the CFPB has noted, there are more payday loan storefronts in America than there are McDonald’s restaurants—and that doesn’t even count all the payday lenders that exist exclusively online.

While access to credit is important, too many payday lenders have built their business models around trapping families with debts they can’t ever hope to repay. It’s like throwing bricks to a drowning man. The industry targets communities of color, contributing to the massive wealth disparity between these communities and white communities. Billions of dollars are moving from those who can least afford it directly into the pockets of lenders.

Cracking down on these kinds of payday lenders is one way to give families living in poverty a fighting chance—and that’s exactly what the CFPB is doing. When the agency set out to design a new payday loan rule, it did some of the most extensive research anyone has ever conducted on payday loans. The agency’s data revealed that most people who take out payday loans aren’t able to pay them back by the time they get their next paycheck. Because of that, over 80% of payday loans are renewed after less than two weeks.

The proposed CFPB payday rule is an important step in the right direction. It provides better protections for borrowers—including requiring lenders to assess if a borrower is able to repay the loan—and limits the number of consecutive loans. These restrictions will help ensure that working families can still access payday lending if needed, but the loans will be structured to provide more financial security, not less.

The fight to protect consumers isn’t over—it’s really just beginning.

Despite the work the CFPB has done, the fight to protect consumers isn’t over—it’s really just beginning. All the important work the CFPB does—helping defrauded families, cracking down on the most predatory and abusive practices, bringing more transparency and competition to the market—is at risk if the incoming Trump Administration and congressional Republicans have their way. For years, the big banks and their allies have launched one shameless attack after another trying to gut the CFPB. Recently, just days after the CFPB’s settlement with Wells Fargo for cheating consumers was announced, both House and Senate Republicans advanced bills to weaken the agency. It’s up to all of us to fight back against these efforts and protect an agency that’s put billions of dollars back in the pockets of working families.

Wall Street may not like that the CFPB is standing up for consumers and holding big banks accountable—but the American people do. As a new president takes office, it’s critical that everyone who supports a strong consumer agency continues fighting to protect it and to ensure it can build on its record of success during the Obama Administration.

Editor’s note: TalkPoverty presents this series in collaboration with the Georgetown Center on Poverty and Inequality.



The Obama Legacy: Keeping the Recovery Going

Contrary to the tired trope that “we fought a war on poverty and poverty won,” our anti-poverty policy agenda has been far more effective than most people realize. In 1967, the safety net lifted the incomes of only about 4% of otherwise-poor people above the poverty line; today it lifts 42%.

The safety net’s effectiveness was extremely important during the Great Recession in 2008. Thanks in part to President Obama’s work through the Recovery Act, programs like the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and SNAP (food stamps)—not counted by the official poverty measure—were particularly effective at protecting people. While the official poverty rate grew by 2.6 percentage points between 2007 and 2010, the Supplemental Poverty Measure (SPM)—which includes the effects of safety net programs—grew by only a fraction (0.5 percentage points). In contrast, the milder downturn of the early 1990s resulted in the official poverty rate rising 2.3 percentage points, while the SPM was up a similar 2.2 points. All told, the Recovery Act kept nearly 9 million Americans out of poverty.

The Recovery Act’s expansions of the EITC and CTC were eventually made permanent, and—along with the Affordable Care Act’s Medicaid expansion, if preserved—will serve as long-lasting anti-poverty achievements of the Obama Administration. These and other safety net programs will also continue to boost long-term opportunities by raising earnings and improving health outcomes in adulthood for people who received the assistance as children.

Unfortunately, Medicaid and other anti-poverty programs—not to mention labor standards like the Department of Labor’s new overtime rule—will likely be in jeopardy under a Trump Administration and Republican-led Congress. Protecting these programs from unwarranted attacks must be a top goal of advocates in the coming years.

Pursuing full employment must be another top goal. Though 2015 brought the biggest single-year improvements in income and poverty since the late 1960s—3.5 million fewer people were in poverty than during the preceding year, and inflation-adjusted median household income rose by $2,800—one strong year does not make up for years of wage and income stagnation. Real household income still remains lower—and poverty remains higher—than they were in 2007, before the Great Recession. We haven’t yet offset the weak (“jobless” or “wageless”) early stages of the economic recovery.

Full employment is, quite simply, a situation in which most everyone who wants a job is able to find one. The least economically well-off benefit the most from a full employment economy through higher hourly wages and more hours of work. A decrease in the unemployment rate from 7% to 4.9%, for example, would be associated with a 3.2% raise in hourly pay for low-income workers, a 1.3% raise for middle-income workers, and no raise at all for workers at the top.

Full employment also provides low-income, working families with the opportunity to increase the time they spend in the paid labor market. In simulations, for example, a fall in the unemployment rate from 5.3% to 4% correlates with a substantial increase in annual hours worked by single mothers in the bottom third of the income scale, from about 700 hours per year to over 900. Given their average hourly wage of about $10, that increase in hours worked adds $2,000 to their annual income.

These figures demonstrate that labor demand matters—the working class will take advantage of available hours. Far too often, what conservatives label as an unwillingness to work is in reality an absence of ample, remunerative opportunities to work.

So where do we go from here?

To keep the recovery going, the Federal Reserve must support a full employment economy by not overreacting to price pressures and thus preemptively raising interest rates. Congress should pass a deficit-financed job-creating infrastructure program, rather than the president-elect’s proposed infrastructure privatization scheme and tax giveaway to the wealthy. We must also continue to pressure policymakers to pursue better trade deals—which would remove special investor privileges and patent protections and include enforceable environmental standards, human rights provisions, and rules against currency manipulation—and strengthen labor standards, like the minimum wage, that are extremely popular and improve job quality.

Policymakers also need to start preparing for the next recession.

Policymakers also need to start preparing for the next recession. One of the best ways to do so would be to strengthen the federal budget’s “automatic stabilizers,” which are features that expand and contract in response to economic need. SNAP, Medicaid, and unemployment insurance already serve this function well, but they can be improved to better stimulate the economy. We recommend building on what Congress and the Obama Administration did in the last recession by improving the existing triggers—or economic indicators—that automatically extend the number of weeks during which people can receive unemployment insurance benefits. New triggers that would temporarily bump up both SNAP benefits and the portion of Medicaid spending that the federal government covers for states should also be added.

Concerns about whether a government controlled by the Republican Party will even consider such reforms are well warranted; politicians who oppose anti-poverty spending in general are not likely to support making more of such spending automatic. But recessions can quickly change the politics of public investments. Both Republican President George W. Bush and Democratic President Obama passed stimulus legislation during the last recession, and Congress has enacted temporary expansions of unemployment compensation in response to every major recession since 1970.

Much of our job over the next few years will be to protect vital gains we have made in the fight against poverty. But recognizing those gains—and how much work remains to be done—should provide us with all of the motivation we need to continue that fight.

Editor’s note: TalkPoverty presents this series in collaboration with the Georgetown Center on Poverty and Inequality.



The Obama Legacy: Legal Aid Across Government Agencies

Francesca, a mother of two, was struggling to provide for her family. She took $20 worth of clothing from a store—landing her with a citation and a $300 fine. She paid off the fine, but the record of the ticket followed her, and made it impossible for her to find and keep a stable job. Thanks to a U.S. Department of Labor funded job-training program, she was referred to Legal Action of Wisconsin, who helped her get the ticket dismissed and expunged. Almost immediately, she got a job at a bank call center—a job she’d been rejected from previously due to her record. Less than eight months later, she got a raise.

Francesca was lucky. Most of the millions of low-income Americans faced with catastrophic events—like an abusive partner, the potential loss of a home or a job, or lack of health care—don’t get the legal help they need. Paying for legal assistance is out of the question, since lawyers cost $200 to $300 per hour on average. Legal aid options exist, but they’re stretched painfully thin: There’s less than one legal aid attorney available per 10,000 Americans living in poverty. As a result, an estimated 80% of low-income Americans’ legal needs go unmet.

Our justice system—and our ability to achieve a wide range of federal priorities—depends on people getting the services they need to address their problems. That’s why four years ago the White House Domestic Policy Council and the Department of Justice created a federal interagency group to identify the federal programs, policies, and initiatives that would be more effective with civil legal aid. Last year, President Obama recognized the power of civil legal aid by making the effort a White House initiative and expanding its reach to 22 federal agencies.

In his Presidential Memorandum establishing the White House Legal Aid Interagency Roundtable, President Obama noted:

Federal programs that are designed to help the most vulnerable and underserved among us may more readily achieve their goals if they include legal aid among the range of services they provide. By encouraging Federal departments and agencies to collaborate, share best practices, and consider the impact of legal services on the success of their programs, the Federal Government can enhance access to justice in our communities.

The tight match between federal agencies and legal aid happens throughout the federal government. The Department of Labor, for example, has a vested interest in making sure Francesca—and the millions of Americans like her—can find and keep a job. The Department of Veterans Affairs needs to make sure that veterans receive their benefits so they can keep a roof over their heads; the Department of Justice needs to help victims of elder abuse escape their abuser; and the Federal Trade Commission’s work to combat consumer scams needs support from legal aid providers who are often the victims’ first responders.

Thanks to the Roundtable, the Corporation for National and Community Service and Department of Justice teamed up to launch Elder Justice AmeriCorps, the first ever army of lawyers to help victims of elder abuse; Department of Labor-funded American Job Centers can offer legal help to remove obstacles to employment; the Department of Justice-Department of Housing and Urban Development Juvenile Reentry Assistance Program gets legal help to young adults in public housing to give them a second chance to succeed; and the Department of Veterans Affairs’ Supportive Services for Veteran Families program helps ensure homeless veterans get the legal aid they need to get into stable housing.

Studies have shown time and again that legal aid makes a difference. Representation in housing cases increases the chance a family stays in their home; domestic abuse victims are more likely to break the cycle of violence when they have legal help; and people with criminal records are more likely to find employment if a lawyer gets their old record expunged.

Just as it’s wise to plug up a leaky roof before water seeps into the walls and causes extensive damage, civil legal aid saves public dollars by preventing problems that can be costly and harmful. For example, studies show that legal aid can improve health outcomes and drive down healthcare costs, and accelerate children’s transition from foster care to a forever family, reducing direct payments to foster parents and the expense of monitoring them.

We’re at the end of an administration that has fought to ensure Americans have access to justice and to get the best results possible for the low-income and other vulnerable people we serve. Although much has been accomplished, we must continue to expand access to civil legal aid and enhance the quality of life for all families and communities.

Editor’s note: TalkPoverty presents this series in collaboration with the Georgetown Center on Poverty and Inequality.



The Obama Legacy: Creating More, Better Jobs

During his 2016 presidential campaign, president-elect Donald Trump promised that if he was elected, “the American worker will finally have a president who will protect them and fight for them.” Creating good-paying and high-quality jobs is definitely a worthwhile goal for the president to increase Americans’ living standards and decrease poverty.

Despite the president-elect’s claim that there are “no jobs,” the labor market has improved at a remarkably steady rate as the country worked its way out of the deep recession. During the past six years, there has been job growth each and every month, and a 5 percentage point drop in the unemployment rate. In part, that’s due to President Obama’s Recovery Act, which stimulated growth, provided aid to states, and invested in infrastructure. The rescue of the auto industry saved at least 1 million jobs, and kept an entire region out of a severe depression.

In 2015, most Americans finally started to feel the benefits of the recovery. Income rose for the typical American household, and the poverty rate saw one of the largest single-year declines in almost 50 years—primarily due to improvements in the labor market.

As steady as the recovery has been, the United States has not yet reached a full employment economy. There are still too few jobs, too few hours, and too slow wage growth for millions of people who are willing and able to work. Along with a strong safety net, decent jobs and wages for low-income people and their families is one of the most effective methods of reducing poverty.

If the next administration genuinely wants to create decent jobs, it will need to do much more than strike piecemeal deals with individual companies. It should work with the Federal Reserve to prioritize full employment, and make sure that we get there by keeping interest rates low until there is consistently strong wage growth. It should also take steps—some of which were taken by President Obama—to make sure these jobs make it possible for people to support themselves.

Raise the Minimum Wage

Despite what some policymakers and pundits suggest, a significant share of poor people already work—and their wages and benefits from that work are their main source of income. The problem is that their wages are too low. Full-time, year-round minimum wage workers don’t make enough to support a single person, much less a family. For people who rely on the federal tipped minimum wage of $2.13 per hour—disproportionately women and people of color—the struggle can be even harder.

Congress has failed to raise the federal minimum wage for seven years, so Obama relied on executive action when he could. He raised the minimum wage to $10.10 for all federal contractors, many of whom work at poverty-level wages. Some individual states also raised their minimum wages, which is correlated with faster wage growth for low-wage workers.

The rest of the country is long overdue for a raise too, and Trump has—at times—promised to give it to them. However, given how opposed Trump’s pick for Labor Secretary is to even a modest increase, it’s unlikely that the new administration will take this action on behalf of workers.

Enforce and Update Labor Standards

Workers lose tens of billions of dollars a year due to wage theft, when employers fail to pay minimum wage, overtime, payroll taxes, or worker’s compensation premiums. Stolen pay can add up quickly for low-wage employees, and it can make the difference between making rent or facing eviction. Stronger enforcement of labor standards that guard against wage theft, and updates to outdated standards—such as increasing the overtime threshold and eliminating the tipped minimum wage—would especially benefit low-income workers.

Under Obama, the Department of Labor (DOL) implemented contracting regulations that include not only a higher minimum wage, but also address wage theft, on-the-job health and safety hazards, sexual harassment, race discrimination, and wage transparency. In addition, the Obama DOL applied the minimum wage and overtime regulations to the home health care industry, whose almost 2 million care workers are generally women of color and immigrants earning wages at or below the poverty line.

End Irregular Scheduling

Irregular work scheduling denies workers any dependability in their schedule or pay. That makes it nearly impossible for working parents to find child care, know whether they are going to get the hours they need, or coordinate schedules between multiple jobs. These employment practices are also more likely to affect low-wage workers who lack the leverage to push for better wages and hours, which leaves them facing job and income insecurity and a higher likelihood of falling into poverty. To remedy these problems, policymakers could enact laws to require minimum reporting pay and advance notice of worker schedules, allowing people to plan their lives and meet family responsibilities.

Provide Paid Sick and Family Leave

Seventy-three percent of the lowest wage private-sector workers lack a single paid sick day, and 96% do not have paid family leave through their employers. That leaves workers—particularly low-income workers—in an impossible position where they have to choose between getting paid or caring for themselves or their families. At best, a missed paycheck leads to many families and individuals making tough choices among expenses on basic needs; at worst, it can lead to hunger, homelessness, or worsening illness.

President Obama issued paid sick leave and paid family leave to federal workers and contractors, and while this is a step in the right direction, millions more workers need the same support. Extending earned sick leave and paid family leave to all workers will greatly impact the lowest-wage workers, who are 4.5 times more likely to lack paid sick time compared workers at the top of the wage distribution.

A Strong Safety Net

We need a strong and effective safety net for people who are unemployed, can’t work, or have jobs that pay poverty wages. For example, Obama’s expansions of the Earned Income Tax Credit and the Child Tax Credit target working families and kept 9 million people out of poverty between 2009 and 2011; his extension of emergency unemployment compensation and extended unemployment insurance benefits lifted 2.5 million people out of poverty in 2012; and last year, Social Security benefits alone lifted 26.6 million people above the poverty line. Without stronger wage gains, particularly for lower-income workers, the safety net will need to continue to work harder every year simply to keep poverty rates from increasing.

But the safety net faces the possibility of historic cuts under a Trump Administration, with Social Security, housing assistance, Medicaid, and nutrition assistance all at risk. And that’s not even including the threat to the Affordable Care Act, which has reduced the share of Americans without health insurance to a record low and increased millions of Americans’ economic security.

As a new administration takes the baton, we need to strengthen efforts to help workers and reduce poverty.

Editor’s note: TalkPoverty presents this series in collaboration with the Georgetown Center on Poverty and Inequality.



The Obama Legacy: Supporting Children and Families

President Obama took office in the midst of the Great Recession—a low point for low-income children who faced the prospect of hunger, unstable housing or even homelessness, and a sharp cutback in work hours for their parents. He will leave office having made significant progress in helping stabilize families, thanks to successes in record access to health care, reduced child poverty, an economy that is generating more jobs, and the potential for better wages and working conditions. Should the momentum continue, we will see improved educational and employment outcomes for children as they reach adulthood—which is vital to our economy as these children replace a retiring Baby Boom generation.

Yet we also have much unfinished business, in part because so many of the administration’s promising initiatives—such as comprehensive immigration reform, a significant investment in child care and early childhood education, and a major youth employment initiative—were not enacted. And unfortunately, the ideas currently proposed by leaders in Congress and the President-elect’s transition team would tear apart not only President Obama’s successes but also the core of our safety net.

Here are five areas where the Obama administration sought to drive progress for children and families—and what we expect from the next administration.

Expanding Health Insurance

Children’s health insurance has increased dramatically under the current administration. Thanks largely to the Affordable Care Act (ACA), about 1.7 million children gained coverage from 2013 to 2015. Now more than 95% of children are insured—a record high.

These improvements in health insurance have long-term positive consequences. There are obvious benefits like reductions in infant mortality and childhood deaths, improved health, and reduced disability. But there are subtler effects, too: expanding health coverage for low-income children improves high school and postsecondary success, and also employment over the long haul. Plus, children’s life chances are improved when parents are able to get the care they need, like treatment for depression (which is widespread among low-income mothers of young children).

Despite the mounting evidence of lifetime benefits for children, President-elect Trump and Republican leaders in Congress have vowed to repeal the ACA. If they succeed, the number of uninsured children will double—even without accounting for the additional cuts now being discussed for Medicaid, which is especially important to low-income families.

Reducing Child Poverty

During the worst of the Great Recession, more than 21% of children lived in poverty—15.6 million in total. By 2015, the number had dropped by about one million, and the child poverty rate was down to 19.7%. While that rate is still far too high, the improvement reflected an economic recovery that helped all families.

The Obama administration fought to protect key safety net programs that support families when they are most economically vulnerable—such as the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps)—and successfully expanded the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). These programs are crucial for low-income children—in 2015, SNAP reduced child poverty by 2.7 percentage points and the EITC and CTC together reduced it by 6.5 percentage points. As with health insurance, these programs pay off for a lifetime: children getting this help have improved health, education, and employment outcomes.

Despite this strong evidence, Congress and others have argued to sharply cut SNAP or change its structure to a block grant—a fixed amount of money that states can spend for various purposes. That fixed dollar amount—which doesn’t increase during tough economic times—leaves families and communities without resources when they need them the most.

Addressing Disparities for Children of Color

Despite some progress, disparities for children of color remain stark. About 1 in 3 African American children and 3 in 10 Hispanic children live in poverty, even with high levels of household work effort. That’s more than double the poverty rate for white children. Fixing these disparities matters more than ever to the nation’s future, because of who today’s children are: almost half are children of color (a milestone already reached for young children), and about one-quarter are children of immigrants.

The Obama administration made important commitments to build ladders of opportunity for children and families of color, though the work remains unfinished. The administration made strides on educational equity, beginning with early childhood education up through improved access to postsecondary education and job training. It also focused on justice reform, with the goal of reducing interactions between students of color and law enforcement in schools.

In addition, more than 5 million U.S. children have at least one parent who is an unauthorized immigrant. In an effort to keep these families together, the administration issued an executive action providing temporary protected work status for parents of children who are American citizens or long-term residents—but court action blocked it. Now these children remain at risk of separation from their parents, which creates high levels of stress and undercuts their development and their families’ economic security.

Fair Wages and Working Conditions for Families

About two-thirds of poor children live with a working adult. These families typically must confront a combination of low wages, volatile and inadequate work hours, and insecure jobs.

Over the past eight years, dozens of states and cities have passed paid sick time, paid family leave, and scheduling laws that make a big difference to these families. The administration’s commitment to paid leave—including strong support for the federal Healthy Families Act and its “Lead on Leave” campaign—helped fuel change at the local and state level. Moreover, the administration’s paid sick days and minimum wage executive orders for government contractors and the overtime rule are crucial expansions of labor protections that could benefit millions of workers.

But while bills to take the paid leave, scheduling, and minimum wage provisions nationwide were introduced, none has passed the divided Congress—and the President-elect’s announcement of a Labor Secretary who is sharply critical of regulations to help low-wage workers suggests the modest steps taken so far could be rolled back.

Stalled Budget Investments in Children

Unfortunately, what has not improved nearly enough in these eight years is public investment in children through child care and Head Start, as well as youth development activities and career opportunities (with the exception of modest increases in Pell grants).

The administration’s strong budget proposals to provide all low-income infants and toddlers with access to high-quality care, and to expand other early learning programs, were never enacted. In fact, even though Congress did enact important bipartisan measures to improve the major federal program that helps low-income parents with child care—such as streamlining rules so parents can keep child care support despite unstable work hours, and strengthening training for child care workers—it never provided funding to support the changes. Today, less than 1 in 6 eligible children receive child care assistance, less than half of eligible preschoolers benefit from Head Start, and Early Head Start serves less than 7% of eligible infants and toddlers. This lack of action flies in the face of resounding evidence that early childhood investments pay off both for children and the economy over the long run.

Overall, the agenda being discussed by Congressional leaders and the President-elect’s transition team fails to build on the administration’s accomplishments. It also proposes denying basic help like health care and nutrition to a generation of children, which would have lifelong consequences. All Americans need to fight back against these devastatingly shortsighted choices, which would place children’s own healthy development, education, and work success at risk—along with our nation’s economic future.

Editor’s note: TalkPoverty presents this series in collaboration with the Georgetown Center on Poverty and Inequality.