Director’s Notebook: What We're Hearing: Financial Challenges Along the Gulf Coast

There are many reasons why financial regulators failed to take action in the mid-2000s to prevent the subprime mortgage crisis. High on this list was a lack of attention to local market conditions and the lived experiences of families and businesses around the country.

Staying connected to communities is crucial for effective regulation. That's why we not only analyze data from our Consumer Complaint Database to understand families’ financial challenges, but also engage directly with people across the nation. Recently, I traveled to Alabama, Louisiana, and Texas, meeting with consumers, community leaders, and advocates in cities along the Gulf Coast. These conversations, combined with our complaint data, paint a vivid picture of the financial challenges facing this region.

The Voice of Consumers: What Our Complaint Data Tells Us

There are over 800,000 complaints from people in Alabama, Louisiana, and Texas in our Consumer Complaint Database. This represents a significant portion of the more than 5.6 million complaints we've published. Complaints from these states have surged by more than 70% over the past year. The most frequent issues relate to consumer and credit reporting. Many people struggling with incorrect information on their reports.

But numbers only tell part of the story. In our meetings, we heard how these issues play out in people's daily lives. The southern United States, while one of the most diverse areas of the country, faces unique financial challenges. Our research has shown that people in this region, particularly those in rural and lower-income areas, often struggle to access basic banking services and mortgage lending.

The Burden of Medical Debt

CFPB research has found that rural southerners are more likely to have medical collections on their credit reports, a fact that was echoed in the stories we heard on our trip. Our research consistently shows that people living in the South are most likely to have medical bills on their credit reports. During our visit, we heard from people who found themselves having to choose between seeking medical help or putting food on the table.

One Texas consumer shared in a complaint how a disputed medical bill from a work-related injury affected their ability to get pre-approved for a home mortgage, illustrating how medical debt can create lasting financial obstacles.

The CFPB has proposed a new rule that would remove medical bills from most credit reports, increase privacy protections, help to increase credit scores and loan approvals, and prevent debt collectors from using the credit reporting system to coerce people to pay.

Natural Disasters and Financial Stability

The specter of natural disasters looms large over the financial health of Gulf Coast residents. Hurricane Beryl's recent devastation served as a stark reminder of how quickly a family's financial stability can be upended. (We published consumer resources for financial recovery). We heard how people are still dealing with financial consequences and debt stemming from Hurricanes Katrina and Rita. In our discussions with local leaders, we heard about the long-lasting impact of these events, from insurance woes to protracted recovery efforts.

Local leaders and community advocates highlighted how extreme weather events are causing homeowners insurance costs to surge or policies to be cancelled outright. This ripple effect makes mortgages more expensive and limits affordable housing options. Some residents find themselves forced into expensive force-placed insurance. Others are unable to sell their homes due to a lack of available insurance.

Recovery from natural disasters remains a persistent challenge. Community leaders shared stories of vulnerable homeowners being targeted by unscrupulous actors in the wake of disasters. We also heard about the unique difficulties faced by people who inherit property in affected areas, often struggling to navigate complex legal and financial systems while trying to rebuild.

The Struggle with Mortgages and Foreclosures

Mortgage and foreclosure issues were a common thread in both our complaint data and our community meetings. Homeowners, legal services providers, housing counselors, and fair housing organizations all shared stories of frustrating attempts to communicate with mortgage companies when facing financial difficulties or simply seeking information about their payments. In Alabama and Louisiana, about a third of mortgage-related complaints specifically concern foreclosure. The numbers back up these anecdotes: these states, along with Texas, have a higher percentage of mortgages that are 30-89 days delinquent compared to the national average.

One servicemember from Louisiana told us about receiving conflicting information about their foreclosure status. This confusion left them at risk of losing their home due to miscommunication. An Alabama veteran described their struggle with COVID-19 relief programs. The unclear information they were given left them facing unexpected demands for lump-sum payments. These stories underscore the need for clearer communication and more robust support systems for homeowners in distress.

Earlier this month, the CFPB proposed new rules to make it easier for homeowners to get help when they are struggling to pay their mortgage.

Emerging Concerns: Predatory Practices in Solar Energy

Rooftop solar continues to grow throughout our country, and that’s particularly true in regions like the Gulf Coast that have sunnier climates. While solar panels can reduce a homeowner’s energy costs, financing them can often be complex and confusing, given the difficulty of predicting how much those savings are worth.

Advocates and community leaders shared with the CFPB that they are seeing more door-to-door sales of rooftop solar pushing misleading information and extremely expensive financing options. We heard stories about many people, particularly lower-income and older Americans, who have been made financially worse off due to these tactics. They urged the CFPB to closely scrutinize these financing practices.

Moving Forward: CFPB's Commitment to Gulf Coast Communities

These insights from the Gulf Coast region remind us how important it is to stay connected to the communities we serve. By combining on-the-ground observations with data from our complaint database, we can better identify and address financial challenges before they become widespread crises. We remain committed to ensuring a fairer and more transparent financial marketplace for all Americans. We encourage consumers to continue sharing their experiences through our complaint process.

Moving forward, we will use these insights to inform our work, from rule-making to enforcement actions. We're already taking steps to address some of the issues we've heard about, such as proposing new rules to make it easier for homeowners to get help when they're struggling with their mortgage payments and to limit how medical debt information can be used in credit decisions.