Compilation of Payday Loan Legal Settlements

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

 

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.
PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

CRC is starting to compile payday loan settlements- if we’ve missed any, please send them to us: SCOFFEY AT CALREINVEST.ORG and we’ll post em here.  And, Advance America has its own post about all their settlements. You can read it here:  ADVANCE AMERICA PAYDAY LENDER SETTLEMENTS

State bars internet lender, wins $11.7M settlement over ‘rent-a-tribe’ loans
CashCall Inc., an internet lender accused of hiding behind an American Indian tribe to break state laws, agreed to pay nearly $12 million to settle charges filed by Minnesota’s attorney general.The company, based in California, was also barred from further business in the state, Attorney General Lori Swanson said Thursday. “The company engaged in an elaborate scheme to collect payments far higher than allowed by state law,” Swanson said in announcing the settlement. CashCall must cancel all outstanding loans, pay back consumers and “undo any adverse reporting to the credit bureaus.” August 18, 2016.

Arkansas AG Settles Payday Lending Lawsuit for $750,000  One of the defendants, a South Dakota based company, identified itself as a tribal entity with sovereign immunity. The company, however, was neither owned nor operated by a tribe. The complaint alleged that the South Dakota lender entered an agreement with a California-based company, pursuant to which it would originate payday loans before assigning them to the California company to collect. July 9, 2016.

Courthouse News Service:  $1.6 Million Settlement With Payday Lenders: Nebraska will accept $1.6 million to settle a predatory lending suit against CashCall and Western Sky Financial, which it accused of falsely claiming tribal affiliation to duck lending laws. (May 6, 2016).

Times Free  Press: Chattanooga payday king justified illegal business by giving money to charity  (May 18, 2016)  A used car salesman turned tech entrepreneur who operated an illegal payday lending syndicate from Chattanooga will pay $9 million in fines and restitution, as well as serve 250 hours of community service and three years of probation, after pleading guilty to felony usury in New York. Carey Vaughn Brown, 57, admitted to New York prosecutors that he broke the law from 2001 to 2013 by lending millions of dollars — $50 million to New Yorkers in 2012 alone — with interest rates well in excess of the state’s 25 percent annual percentage rate cap.

New York Touts $3M Payday Loan Settlement:  (May 18, 2016). In its first such action, New York’s top financial watchdog reached a $3 million settlement Wednesday with two debt-buying companies that improperly bought and collected on illegal payday loans.

Vermont AG Enters Largest Settlement With Online Payday Loan Processor  (May 24, 2016)  In the settlement agreement, the company admitted that it processed electronic financial transactions on behalf of approximately 43 separate lenders, in connection with high-interest, small-dollar consumer loans made over the internet. None of those lenders were licensed to make loans in Vermont. Between 2012-2014, however, the company processed approximately $1.7 million in transfers from Vermont residents’ bank accounts.

Payday lender will pay $10 million to settle consumer bureau’s claims  (July 10, 2014) “Ace used false threats, intimidation and harassing calls to bully payday borrowers into a cycle of debt,” bureau Director Richard Cordray said. “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back.”

California Payday Lending Statistics

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

payday lender vultures

Payday and Car Title Lending Statistics

Payday Lending is a $135 million net drain on California’s economy each year: Despite industry claims about creating jobs, a 2013 report from the Insight Center for Community Development estimates the payday lending industry subtracts 1,975 jobs from California’s economy each year, and is a net loss to the state economy of over $135 million annually.

Nationally, four out of five payday loans are rolled over or renewed: Countering industry claims about payday loans as being useful for “one-time emergencies,” a study by the CFPB found that 4 out of 5 payday loans are rolled over or renewed within two weeks, adding to concerns about the high-cost “debt traps” created by these loans.

California consumers pay over $507 million in payday loan fees annually and $239 million in car title fees: A new report from the Center for Responsible Lending finds that consumers pay $239,339,250 in fees for car title loans and $507,873,939 in payday loan fees, ranking California as the #2 state for highest amount of fees paid for car title and payday loans.

More than 15,591 Californians had cars repossessed in 2014 because of car title loans: According to the California Department of Business Oversight, the charge-off rate for auto title loans in 2014 was 4.5 percent. (17,633 of 394,510).  At the national level, recent research from the CFPB found that 1 in 5 car title borrowers will have their car repossessed.

Do these facts concern you?  There is a KEY opportunity to weigh in with the Consumer Financial Protection Bureau as it finalizes rules to regulate payday, car title, and installment lenders. Please share your stories and comments here: CFPB comment.

Learn more about payday lending by visiting CRC’s website.

Would Postal Banking Be Better than Payday Loans?

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

Earlier this week, Liana Molina, director of community engagement at the California Reinvestment Coalition, testified at a field hearing held by the Grand Alliance to Save Our Public Postal Service.  The alliance is focused on  “the choice now facing the U.S. Postal Service: Build on the heritage of universal, nationwide service and expand to meet the needs of the hi-tech economy and low-income communities – or continue to shrink with declining service, facility closings and job cuts.”

USPS picture

Molina’s testimony focused on a proposal for the USPS to complete with fringe, predatory payday, car title, and other high cost lenders by instead offering safe, low-cost financial services.  Her testimony is included below.

Good evening, my name is Liana Molina. I’m the Director of Community Engagement at the California Reinvestment Coalition (CRC). The California Reinvestment Coalition is a statewide, membership based organization working to build a fair and inclusive economy that meets the needs of communities of color, low-income communities, and others who have been marginalized and historically underserved.  We use strategic advocacy that leads banks and other corporations to provide investments and financial services that expand access to housing that is affordable, entrepreneurial opportunities, good jobs, and other tools to create and sustain household and community wealth.

Historically CRC has advocated for greater transparency and accountability of the banking industry, and we’ve pushed banks to grow and strengthen their community reinvestment lending, services and investments in low-income communities across California. Today we continue our work to expand access to fair and affordable banking, credit and other financial services and opportunities for underserved consumers.

I lead CRC’s Stop the Debt Trap campaign to reform high-cost payday, car title and installment lending practices. We are employing a multi-pronged approach that entails legislative and regulatory advocacy at the local, state and federal level. Before I delve into the specific policy reforms we are seeking and how the US Postal Service can play an important and impactful role in the struggle against predatory lending, let me share why we got involved in the fight to end predatory payday lending.

Our efforts against predatory payday lending stem from our work to change and improve the mainstream banking sector.

Did you know that every single payday loan borrower is also a bank customer? A consumer needs to have an active checking account in order to obtain a payday loan, since the loan is secured with a post-dated check which is then deposited by the lender on the consumer’s next pay date.

So these consumers are not entirely unbanked. These are people who likely use their bank accounts for direct deposit of their income and to handle other basic financial transactions, such as paying regular bills. Yet, these consumers cannot borrow a $300 or $500 loan from their bank because the banks do not make small dollar loans that meet the credit needs of their clients. So this is one way the banks are part of the problem.

Additionally, many of the big banks are actually invested in payday loan corporations through extending lines of credit they provide to payday lenders, which enable payday lenders to conduct their business. So while the banks aren’t making affordable small dollar loans directly to their customers, they have major credit agreements with payday lenders who then charge these same customers triple-digit interest rates on short-term loans. Banks involved in financing high-cost, low-quality lending through lines of credit and term loans to payday loan corporations include Wells Fargo, Bank of America, JP Morgan Chase, US Bank and others.

Finally, CRC has prioritized our Stop the Debt Trap campaign to end predatory consumer lending because when we talk about the provision of financial services in low-income communities, many economically disadvantaged neighborhoods do not have access to full service bank branches. Instead, these neighborhoods are saturated with fringe financial entities such as check cashers, pawn shops and payday loan outlets, all of which strip the income and assets of consumers struggling to make ends meet. We also know that payday loan stores are more likely to be located in African-American and Latino neighborhoods than in white neighborhoods.

Given this landscape, there is room for a lot of improvement in how our financial system meets the credit and capital needs of low and moderate-income consumers. While CRC agrees that there is a legitimate need for access to credit, debt trap products like payday, car title and installment loans (which are basically payday loans on steroids) do not help people over the long-term.

Payday Lenders

In California, the interest rate on a two-week, $300 payday loan is 459% APR. It amounts to $15 per $100, or $45 to borrow $255. It may not seem so bad at the face value, and most consumers can afford to pay $45 for a $255 loan. However, payday loans require a balloon payment of the full $300 at the borrower’s next pay date, two-weeks later. Most borrowers do not have $300 to pay off the debt without having to re-borrow. So unless the borrower has an increase in their income or a decrease in their expenses, in 4 out of 5 cases, they will take out another loan in order to meet their basic expenses for the next two weeks. This cycle repeats itself an average of 7-10 times for consumers, and drains Californians of over $578 million in interest and fees, annually.

High-cost car title and installment lending is growing in California. Now that the federal Consumer Financial Protection Bureau is poised to issue rules on payday lending, more payday lenders are moving into these other loan products that are just as dangerous. Our state doesn’t regulate the interest rates on payday loans below $300 or on consumer loans above $2,500. We are seeing more car title loans at interest rates at around 100% APR and longer-term installment loans with interest rates at 200% or higher. For example, one borrower working with us on the campaign paid $6,700 over 24 months for a $2,529 car title loan at 112.47%. It’s outrageous.

CRC and other consumer groups have been advocating for changes to local and state laws to rein in these predatory lending practices for many years, and it has been an uphill battle. One of our greatest challenges is the lack of wide-scale alternatives available on the market. Many of our policy makers accept predatory lending as a necessary evil, because they claim that their constituents need access to these loans, and the banks are not lending.

Do you see where I’m going with this?

This is where the concept of postal banking could really make a tangible difference in providing an accessible, responsible, affordable alternative loan product to consumers. The US Postal Service already provides some financial services, such as money orders, cashing of treasury checks, international paper and electronic money orders and gift cards. There is tremendous potential to expand the products and services offered by the USPS to meet the financial needs of underserved populations. We recognize that moving the postal service into offering consumer loans is a long-term process, not an immediate step. However, given the huge demand for small dollar consumer loans, it is a vision that is worth working toward.

When CRC learned about the Campaign for Postal Banking, we were excited to learn that a national coalition has come together to advocate for the USPS to act immediately to expand and enhance existing products and services. While the creation of small dollar lending and savings programs would necessitate Congressional legislation, the USPS could begin to build on the financial products and services currently offered. For example, the postal service could start cashing payroll checks, it could install surcharge-free ATMs in post office lobbies to enable recipients of public benefits to access their funds without paying fees, and it could introduce bill payment and electronic fund transfer services.

By providing less expensive financial products and services, the USPS could help improve the financial stability of millions of Californians. A postal banking system would not only benefit consumers who do not have access to mainstream financial institutions, it would also provide a sorely needed alternative to the big banks who wrecked our economy with predatory mortgage lending and then exploited tax payers by receiving trillion dollar bailouts.

We know that a public banking option is possible. The United States had a Postal Savings System from 1911-1967, which at its peak held about 10 percent of assets in the entire commercial banking system. Today, 1.5 billion people worldwide receive some financial services through their postal service in countries like the United Kingdom, France, Italy, and Japan. Posts around the world have demonstrated the feasibility of successfully providing financial services, increasing financial inclusion and generating revenue for the postal service.

We believe this is possible in the United States, and it will require our persistent advocacy and campaigning to bring about these types of changes. CRC is optimistic about the current dialogue around postal banking, and we look forward to participating in local, regional and statewide efforts to move this conversation forward. We greatly appreciate the work of A Grand Alliance to Save Our Public Postal Service and the Campaign for Postal Banking.

Thank you for the opportunity to testify.

 

Bill Creating Foreclosure Protections for Widows and Heirs Explained in New Video

pic 2 SB 1150

“Red tape foreclosures” are a problem that are continuing to plague surviving homeowners throughout California, according to housing counselors and attorneys.

New legislation introduced by Senator Leno and Senator Galgiani, The Homeowner Survivor Bill of Rights, Senate Bill 1150, would address this problem.

SB 1150 clarifies the responsibilities of a mortgage lender when a borrower dies and passes the home along to a survivor who wishes to assume the home loan. The legislation ensures that heirs receive accurate information about loan assumption and foreclosure prevention programs. It also gives survivors a single point of contact with the lender and the ability to simultaneously apply for loan assumption and modification. SB 1150 is sponsored by the California Alliance for Retired Americans, Housing and Economic Rights Advocates and California Reinvestment Coalition.

A new interview with Kevin Stein, associate director of the California Reinvestment Coalition, explains the problems surviving homeowners are facing and how SB 1150 would address it.

If you would like to learn more after watching the video, visit: www.survivorbillofrights.org

Supporters of SB 1150 include

  • California Association of Retired Americans (co-sponsor)
  • Housing and Economic Rights Advocates (co-sponsor)
  • California Reinvestment Coalition (co-sponsor)
  • Attorney General Kamala Harris
  • AARP California
  • AIDS Legal Referral Panel
  • Bay Area Legal Aid
  • California District Attorneys Association
  • California Nurses Association
  • California Professional Firefighters
  • California Rural Legal Assistance, Inc.
  • California Rural Legal Assistance Foundation
  • CALPIRG
  • Capital Impact Partners
  • Community Housing Developers, Inc
  • Community Legal Services of East Palo Alto
  • Consumer Federation of California
  • Courage Campaign
  • Fair Housing of Marin
  • Family Caregiver Alliance
  • Institute on Aging
  • Justice in Aging
  • Legal Services of Northern California
  • Los Angeles County Democractic Party
  • National Center for Lesbian Rights
  • National Housing Law Project
  • Nehemiah Corporation of America
  • Neighborhood Housing Services of LA County
  • Project Sentinel
  • Public Counsel
  • Public Law Center
  • Renaissance Entrepreneurship Center
  • Rural Community Assistance Corporation
  • SEIU California
  • The ARC and United Cerebral Palsy California Collaboration
  • United Domestic Workers of America, AFSCME Local 3930, AFL-CIO
  • Unite Here
  • Western Center on Law and Poverty

CRC Guest Blog: Families Win When Banks Stop Funding Displacement

Paulina Gonzalez, executive director at the California Reinvestment Coalition, wrote a guest blog on the Mission Economic Development Agency blog today about Ellis Act evictions, bank loans that finance these evictions, and one bank’s decision to stop providing these loans.  Take a look!

In August of 2015, community organizations and tenants in San Francisco joined together to take a stand against the banks and the role their loans are playing in financing displacement in the city. The story of this organizing victory sets the stage for holding corporate actors accountable to their communities and builds a model for public-private partnerships for the preservation of affordable rental housing…

Read the rest of the post on MEDA’s blog. 

California Reinvestment Coalition comments on CITNA Bank Community Reinvestment

Editor’s note: Earlier this month, CRC submitted the following letter as part of CITNA Bank’s Community Reinvestment Act exam.  For more information on CRC’s concerns with OneWest’s and CIT Bank’s reinvestment histories, visit www.badbankmerger.com.

November 16, 2015

Assistant Deputy Comptroller Robert Phelps
Office of the Comptroller of the Currency
Chicago Midsize Office
1 South Wacker Drive Suite 2000
Chicago, IL 60606

Cindy Tran
CRA Officer
CITBNA, N.A.
888 East Walnut Street
Pasadena, CA 91101

Re:       CRC comments regarding CITBNA CRA and Fair Lending Examination

Dear Mr. Phelps and Ms. Tran,

The California Reinvestment Coalition submits these comments on CIT Bank’s (CITBNA) CRA performance in California. We request that these comments be considered as part of the OCC’s current CRA and fair lending examination of CITBNA. We further request that these comments be placed in CITBNA’s Public CRA File.

The California Reinvestment Coalition (CRC), based in San Francisco, is a nonprofit membership organization of nonprofit organizations and public agencies across the state of California. We work with community-based organizations to promote the economic revitalization of California’s low-income communities and communities of color through access to financial institutions. CRC promotes increased access to credit for affordable housing and economic development for these communities.

On the heels of a contentious bank merger process that revealed multiple CRA and fair lending concerns raised by a large number of organizations and individuals, we urge the OCC to:

Consider the Extensive Record from the Merger Process

We opposed the Bank’s recent merger in what was one of the most protested bank mergers in recent history. Over 21,000 individuals and over 100 organizations registered concerns. The OCC and the Federal Reserve held a rare public hearing at which a large number of organizations and consumers testified to certain CRA weaknesses and consumer protection failures of the Bank, while also raising a number of fair housing and fair lending concerns.

There were a number of compelling stories of abuse recounted by OneWest and Financial Freedom customers and their families, and a number of compelling stories offered by community development practitioners in the Bank’s assessment area, documenting and lamenting the Bank’s poor CRA performance. We understand that all of relevant information, testimony, comment letters and other evidence presented during the merger process will be considered as part of this exam.

CRC hereby resubmits our eighth comment letter on the merger, attached, which calls for a fair lending investigation into evidence of disparities in the Bank’s foreclosure, lending, branch, REO property maintenance, and reverse mortgage servicing practices. Prior letters raised numerous concerns about the Bank’s poor reinvestment record, its weak reinvestment commitments, and its problematic compliance with consumer protection laws and regulations. We appreciate that the OCC will consider all of these comments, and those of all commenters, during this examination process.

In fact, the OCC conditional approval order suggested that a number of issues raised during the merger were better addressed during the CRA and fair lending examinations of the Bank. In discussing concerns about OneWest Bank’s foreclosure and REO property maintenance practices, the OCC notes it will “continue to assess potential discrimination as part of its supervisory process.”[1] Pursuant to 12 CFR 25.28(c), the results of the OCC’s evaluation of a bank’s CRA performance may be adversely affected by evidence of discriminatory or other illegal credit practices. In that regard, we note the most recently published CRA Evaluation of Bank of America which resulted in a lower CRA Rating for Bank of America in light of fair lending and credit practices concerns and settlements.[2]

Scrutinize and Investigate Questionable Letters of “Support”

While we certainly agree that the OCC should consider all public comments submitted during the merger process, including those of bank supporters and positive comments about the Bank’s performance, we urge the OCC to scrutinize those emails resulting from the Bank’s solicitation of support letters for the merger via its website, which resulted in several form letters being submitted. The OCC on the 2nd page of its merger approval order notes, “Approximately 1,700 of the letters resulted from an email campaign initiated by CITG and OWB seeking support for the merger.”[3]

Yet, as CRC has noted previously, we have come to understand that a number of these alleged “supporters” may not have supported the merger at all, and we are very much concerned about the prospect that the public comment process was manipulated and that certain “letters of support” were fraudulent.

Early on, CRC did notice certain irregularities in the email addresses expressing support for the Bank. Then CRC received a disturbing email on September 21, 2015. An individual, apparently under the misunderstanding that CRC supported this merger, expressed dismay that a letter of support for the OneWest CIT Bank merger was sent to the regulators in his name. He decried the “bogus email” support letter, and noted it “is not mine and I did not authorize or send this email, and I did not authorize for you to use my name and address to be used for any support of One West and CIT Merger, I have no affiliation or whatsoever to this companies and would like you to stop using my name, address or email address…”

Most troubling, the individual indicates that somebody created a yahoo email address using his full name, without his knowledge. It appears that this same email was also sent to the OCC and the Federal Reserve Board. It is unclear what steps if any the OCC and the Federal Reserve plan to take in response to this email.

This email is shocking and suggests that one or more people may have manipulated the public comment process and committed a fraud on the federal regulatory agencies which rely on public input to inform their deliberations.  In follow up “spot checks” of about 150 email addresses attributed to the petition organized by OneWest’s CEO, at least 25 of the email addresses appear to be non-existent.

In an attachment of 593 petitions in support of OneWest’s call to not hold a public hearing, posted on the Federal Reserve’s website, 100% of the petition signers had Yahoo email accounts- an oddity that adds to our concerns (Yahoo has, approximately, a 3% market share for email accounts).  We further understand that when an email was sent to these individual email addresses, 30%, or 180 of the 593 emails, bounced back, and for the handful of people who replied to the email, some may have indicated that they actually had not supported the merger as their “petitions” purportedly suggested.

Moreover, if the “time stamps” on the emails are accurate, there was an extremely large number of people who cared enough about this merger to sign onto their computers in the middle of the night- with a large number of emails being sent to the Federal Reserve and OCC around 2am on the night of February 13, 2015.

It occurs to us that it is only happenstance that the individual noted above discovered that his name was used improperly and fraudulently, and that it is not to be expected that this information would have ever found its way to us or to the regulators. In other words, if other people had their names used without their authorization, and if unauthorized Yahoo email accounts were created on their behalf, this fraud may have gone undetected. There is no reasonable explanation for all of these oddities occurring relating to “support” letters sent via the Bank’s website.

We accuse no specific person or organization of wrongdoing. But at the same time we are greatly disturbed at the possibility that the OCC and the Federal Reserve community input process may have been compromised. The CRA is a law that allows for and encourages community participation and in so doing, allows for a community perspective to be considered by regulators as they determine how best to supervise, regulate and oversee financial institutions.

We urge the OCC and the Federal Reserve to investigate this matter further, and we would hope that CITBNA would likewise be interested in helping regulators get to the bottom of this. How many letters of support were submitted to the regulators without the knowledge of the purported author? Who is responsible? And what are the regulators going to do about it in order to send the message that manipulating a public process is a serious offense, and to ensure this does not happen again?

Do the Federal Reserve and OCC public comment email systems (and OWB website) have safeguards to “catch” such oddities?  A similar issue occurred in the recent “net neutrality” debate, and the system used to process Congress’ email was able to catch fraudulent emails.

Consider New CRA Performance Data for CITBNA Which Shows Continuing Problems

New data made public and analyzed after the conditional merger approval order further demonstrate that CITBNA (CIT and OWB) has not been meeting community credit needs.

Philanthropy. As one example, according to the OCC’s conditional approval order, the level of OWB CRA qualifying contributions in its assessment areas since its last Performance Evaluation appears to have gone done for each of the last 4 years:

  • $1,675,500 in 2012;
  • $1,127,900 in 2013;
  • $1,054,000 in 2014; and
  • $302,000 as of May 2015.[4]

CITBNA apparently commits to increase the size of annual contributions to $5 million per year, which is positive. Yet, given the Bank’s presence and size in California and data received from 17 California banks, we estimate that 12 or 13 other banks devote a higher percentage of their deposits for CRA purposes than will CITBNA under its new CRA commitment. Again, CITBNA lags its peers.

CRC urges all banks to devote at least .025% of California deposits towards philanthropy in California, and that 50% of all contributions should support critical housing and economic development activities. OWB’s past performance and CITBNA’s most recent commitments do not suggest it will meet these benchmarks.

Affordable Housing. CITBNA has identified affordable housing as a priority need in its assessment area. Yet the Bank notes that “mortgage lending will not be the primary focus of CITBNA,” that Low Income Housing Tax Credits “will not be appropriate investments for CITBNA,” and that “multifamily lending historically has not been a key part of its loan origination strategy.”[5] Which leads one to wonder how CITBNA plans to address the critical community need it has identified. The Bank noted that it originated $89 million in CRA-qualifying multifamily loans in LMI census tracts since its inception, but it does not specify whether these loans would qualify as Community Development loans for CRA purposes, and whether these loans financed the development or preservation of deed restricted affordable housing (see below for a further illustration of how multifamily lending does not allows help, and can actually harm, low income communities).[6] We trust this information will be forthcoming in the bank’s CRA exam results.

Community Development. We urge the OCC to continue to scrutinize activities for which the Bank seeks community development credit. We note again that one of the Bank’s Responses to an Additional Information Request during the merger process revealed that OneWest overstated its community development loan activity by a whopping $75 million in an October 30, 2014 letter and had to revise and reduce its projections based on feedback from its regulator. The record should be clear as to what kinds of lending OneWest improperly sought to classify as community development lending, and more information should be provided on what kinds of loans OneWest still counts as “community development lending.”

Relatedly, CRC recently became aware that certain other banks (not necessarily OWB or CITBNA) were seeking CRA community development credit for loans made to investors to purchase small, Rent Controlled buildings in LMI tracts, without the regulator (or perhaps the lenders) knowing that the investor purchasers plans were to evict all of the tenants (mostly seniors, low income, long term, and often, of color) and to convert the low cost rental housing into expensive homeownership Tenancies in Common. Regulators must scrutinize purported community development lending and investments to ensure that these activities actually benefit communities.

Additionally, the Bank in its Draft CIT Bank, NA Community Benefits Plan sets an investment goal that is opaque, in that it targets investments to 8% of Tier 1 Deployed Capital. CRC urges all institutions to devote at least .25% of California deposits for community development investments each year. Additionally, CITBNA should not rely on Mortgage Backed Securities to meet its community development investment targets, as MBS are generally not impactful or value added for community development activities.

Home Lending. In 2014, OneWest appears to have originated only 102 first lien, home purchase or refinance loans in California. Of these 102 loans:

  • Only 1 was originated to an African American borrower
  • Only 6 were originated to Asian borrowers
  • Only 7 were originated to Latino borrowers
  • Only 14 loans were originated to LMI borrowers, compared to 77 to upper income borrowers
  • Only 38 loans were originated in neighborhoods of color, which is not impressive for a bank with an assessment area focused around Los Angeles
  • Only 6 loans were originated in LMI neighborhoods.

These home lending numbers are very low in terms of overall home lending originated to California homeowners and homebuyers, and also well below the proportional lending by the industry as a whole in California. For all HMDA reporters in 2014 in California, lending to:

  • African American borrowers comprised 2.8% of all loans, compared to 1% for OWB
  • Asian borrowers comprised 13.5%, compared to 6% for OWB
  • Latino borrowers comprised 16.8%, compared to 7% for OWB
  • Neighborhoods of color comprised 47%, compared to 38% for OWB
  • LMI neighborhoods comprised 16%, compared to 6% for OWB.

The Bank only approximated the industry benchmark for lending to LMI borrowers, at 14% of all loans. Yet the industry as a whole doubled CITBNA’s proportional lending to African American, Asian American, and Latino borrowers, as well as to Low and Moderate Income neighborhoods, raising both fair lending and CRA concerns.

Small Business Lending. For small business lending, OneWest appears to have originated only 70 CRA reportable loans in 2014 in California, down from 88 loans in 2013:

  • Only 1 of these loans was in an amount less than $100,000
  • Only 10 of these loans were in amounts of $100,000 to $250,000
  • Fully 59 of these loans were in amounts over $250,000
  • Only 26 loans, or 37% of “small business” loans, were made to smaller businesses with less than $1 million in revenue.

For CIT small business lending in 2014, the Bank originated 448 small business loans in California, offering loans in lower loan sizes (this is positive), but not to smaller businesses (this is not positive):

  • 291 of these loans were in amounts less than $100,000
  • 126 loans were in amounts between $100,000 and $250,000
  • 31 loans were in amounts over $250,000
  • Yet zero of these “small business” loans were to small businesses with under $1 million in gross revenue.

Of 518 CRA reportable small business loans in 2014 from OWB and CIT, only 26 loans, or a paltry 5%, were to smaller businesses, those with less than $1 million in revenue. CRC urges all institutions to strive for fully 50% of all small business lending to be for businesses with under $1 million in revenue.

Branches and deposits. According to publicly available branch and deposit data analyzed via the CRA Wiz program for 2014:

  • Of 74 CITBNA California branches, only 8, or 10.8% of branches were in LMI neighborhoods. This is even less than the low percentages discussed during the merger. Perhaps this reflects a lag in data reporting, and the actual proportion of branches in LMI neighborhoods is slightly higher. Regardless, the industry in California has roughly twice the proportion of branches in LMI communities than does CITBNA.
  • Of 74 CITBNA California branches, only 31, or 42% of branches are in neighborhoods of color, even though 57% of deposits derive from neighborhoods of color.

Taken together, the data do not reflect the performance of a Bank that is helping to meet community credit needs: almost no home lending to LMI borrowers and neighborhoods, miniscule small business lending to smaller businesses, no multifamily loan products, plans to reduce investments in Low Income Housing Tax Credits which help finance affordable housing development, decreasing philanthropy through May of 2015, low branch presence in LMI communities (even compared to peers), but continuing foreclosures and fair lending concerns.

Consider the Large Number of Consumer Complaints That Have Been Filed Against CITBNA

One important measure of how well a Bank is meeting community credit needs can be found in consumer complaint data. The CFPB Consumer Complaint Database represents a primary, accessible, uniform way in which consumers can express their concerns about bank performance.

A review of the CFPB database reveals that nearly 1,400 complaints have been filed by consumers with the CFPB against CITBNA (CIT and OWB) since December 2011. Most of these complaints (90%, or 1,270 complaints) are related to CITBNA’s “Mortgage” products; of which 209 are related to “reverse mortgages.”  It appears that over 50 reverse mortgage complaints have been filed with the CFPB against OWB and CITBNA in 2015, since the CFPB’s initial data reporting of complaints through 2014.

CRC has filed a lawsuit challenging HUD’s denial of our Freedom of Information Act (FOIA) fee waiver request in which we are seeking additional information about the number of complaints filed with HUD against OneWest relating to its reverse mortgage servicing performance, and we will be happy to share this data if we prevail in obtaining this information.

During the merger process, the FRB, via an Additional Information Request, sought data from the Bank about complaints it had received directly from consumers. The Bank reported receiving directly an astonishing 812 complaints, even though the Bank chose to report on complaints received only AFTER it sold most of its servicing rights. The OCC should determine the number of complaints received directly by the Bank during the time frame covered by this exam, and make that information part of the record and its deliberations as to whether the Bank has been meeting community credit needs.

The large number of complaints filed with the CFPB, as well as the number of complaints filed with the OCC and CITBNA directly, should be reflected in the Bank’s CRA Performance Evaluation. As we have urged with PEs of other banks, the OCC should confirm in CITBNA’s Performance Evaluation the number, nature and disposition of OCC complaints.

Further, the OCC, through this examination process and its other supervisory powers, must ensure that CITBNA and its affiliates are complying with fair housing, fair lending, and consumer protection laws, including the California Homeowner Bill of Rights and HUD HECM regulations such as Mortgagee Letter 2015-15 regarding Non Borrowing Spouses.

Consider the Harm Imposed on Communities by CITBNA

Past foreclosures. During the merger process, CRC and many other commenters pointed to the harm imposed by OWB on California communities as a result of 36,000 foreclosures, including 2,000 on reverse mortgage seniors, widows and their families.

Future foreclosures. And yet we know that CITBNA will be foreclosing on numerous additional families. A Freedom of Information Act request to the FDIC by CRC yielded the astonishing confirmation that the FDIC has paid over $1 billion to OWB under the loss share agreement to reimburse OWB for the costs of foreclosure, consistent with the agreement. But we also learned that the FDIC estimates another $1.4 billion in additional loss share payments will yet be made to CITBNA, presumably to reimburse the Bank for the costs of more than 36,000 additional foreclosures in California and untold numbers nationally.

Failure to repay $2.3 Billion in TARP. Additionally, we note once again the harm caused to U.S. Taxpayers by CIT Group in taking $2.3 billion in TARP funds, before declaring bankruptcy and wiping out its obligation to repay this money.

Reducing federal tax liability. Adding insult to injury, comments by CIT Group executives to investors suggest that the Bank intends to use its Net Operating Losses from the bankruptcy to offset expected profits from the recent merger in order to significantly reduce its federal tax obligations in ensuing years.

Reverse mortgage concerns and Non Borrowing Spouses. And of course, we reiterate concerns about potential servicing violations suffered by reverse mortgage borrowers, Non Borrowing Spouses (widows and widowers), and their families, as testified to and commented on as part of the merger process. We urge the OCC (and HUD) to closely monitor the Bank’s implementation of, and compliance with, HUD Mortgagee Letter 2015-15.

Evading HBOR accountability. We again call on the OCC to clarify that CITBNA should not invoke preemption as a way to evade accountability for alleged violations of California’s Homeowner Bill of Rights which is meant to protect residents of the Bank’s CRA assessment area from unlawful and unnecessary foreclosures. Avoiding responsibility and accountability in this way harms LMI communities and borrowers and leads to lost assets.

Confirm That the Bank Needs to Develop a Stronger CRA Plan

The Bank submitted a DRAFT CRA Plan in advance of the February 26 merger hearing. Indications from the Bank’s Community Needs Survey and the Community Day event held on October 6, 2015, suggest the Bank is NOT increasing its overall commitment of $5 billion in CRA activity over 4 years.

Under the conditional approval order, the Bank was supposed to have submitted its revised CRA Plan to the OCC on October 19, 2015. This plan has not been made public, though at the Community Day event the Bank indicated it would share with the public the revised CRA Plan, as well as that day’s power point presentation, if advised to do so by its newly formed Community Advisory Board. Presumably, either the Bank did not seek input from the CAB, the Bank did not heed the counsel of the CAB, or the CAB did not urge the Bank to be transparent with its CRA Plan.

If it is true that the Bank’s revised Plan is substantially the same as its draft Plan in terms of overall commitment, the Bank’s CRA Plan will be roughly ¼ the size of the CRA commitment of a much smaller (and younger) Banc of California, and roughly ½ the size of the CRA commitment of CITBNA’s peer, City National Bank, which despite having fewer deposits in California, committed to $11 billion in CRA activity over 5 years.

In any event, CITBNA’s performance in 2014 and going forward would leave it amongst the worst performing CRA banks in California, based on data received and analyzed by CRC. CRC and its members utilize a set of benchmarks to determine how well a bank is meeting community credit needs. Banks can demonstrate their performance in two ways: by 1) entering into a Community Benefits and Reinvestment Plan that specifies in a clear and transparent manner the bank’s CRA goals over a multi-year period; and 2) providing clear data on the bank’s CRA performance.

Of seventeen (17) California banks which 2014 data, information and reinvestment commitments we reviewed and analyzed, CITBNA would rank BELOW 12 of these institutions in terms of annual percentage of deposits committed to CRA purposes, using estimates from CITBNA’s draft CRA commitment. Of the 5 banks which currently appear to devote less of their proportional deposits for community reinvestment on an annual basis, 3 have not yet provided all of their data and could very well leapfrog CITBNA, moving CITBNA further down the list of reinvestment banks in California.

And this analysis considers 2014 actual performance by the other banks compared to future commitments by CITBNA. So, the few banks who did less in 2014 than CITBNA proposes to do in 2016, may yet exceed CITBNA’s actual CRA performance in 2016 and beyond. CITBNA did not provide data to CRC this year (for 2014 performance) or last year (for 2013 performance).

Conclusion

CITBNA’s overall performance in California Needs to Improve, and that is the CRA rating the Bank deserves. Given the size and reach of CITBNA, and the harm it has caused to communities via thousands of foreclosures and weak reinvestment, CITBNA has not met community credit needs. CITBNA now has an opportunity to turn the page, enhance its CRA Plan and be a constructive force for positive neighborhood revitalization and wealth accumulation for Southern California’s LMI communities and communities of color. But it should not be rewarded for poorly serving and failing to adequately commit to these communities. The Banks’ CRA Rating should reflect poor CRA performance, as well as any fair lending or fair housing violations established.

Thank you for the opportunity to comment. If you have any questions, you can reach me at (415) 864-3980.

Very Truly Yours,

Kevin Stein

Associate Director

Encl:    CRC’s 8th Comment Letter in Opposition to CIT/OWB merger

Cc:       Thomas J. Curry, Comptroller, OCC

Janet Yellen, Chair, Federal Reserve Board of Governors

Richard Cordray, Director, CFPB

Patrice Ficklin, CFPB

Barry Wides, Deputy Comptroller, OCC

Beth Castro, OCC Community Affairs

[1] Stephen A. Lybarger, OCC Conditional Approval, Letter to Joseph M. Otting Re: Application to Merge CIT Bank, Salt Lake City, UT with and into OneWest Bank, N.A., Pasadena, CA and Request for Waiver of Residency Requirement; OCC Control Numbers: 2014-WE-Combination-139872 and 2015-WE-DirectorWaiver-141909, July 21, 2015, p. 36, footnote 1, p. 37, footnote 73.

[2] Office of the Comptroller of the Currency, PUBLIC DISCLOSURE COMMUNITY REINVESTMENT ACT PERFORMANCE EVALUATION Bank of America, N.A., Charter Number:  13044, 100 North Tryon Street, Charlotte, NC 28202m December 31, 2011, available at: http://www.occ.gov/static/cra/craeval/oct14/13044.pdf (see page 14, Fair Lending or Other Illegal Credit Practices Review).

[3] Stephen A. Lybarger, OCC Conditional Approval, Letter to Joseph M. Otting Re: Application to Merge CIT Bank, Salt Lake City, UT with and into OneWest Bank, N.A., Pasadena, CA and Request for Waiver of Residency Requirement; OCC Control Numbers: 2014-WE-Combination-139872 and 2015-WE-DirectorWaiver-141909, July 21, 2015, p. 2.

[4] Stephen A. Lybarger, OCC Conditional Approval, Letter to Joseph M. Otting Re: Application to Merge CIT Bank, Salt Lake City, UT with and into OneWest Bank, N.A., Pasadena, CA and Request for Waiver of Residency Requirement; OCC Control Numbers: 2014-WE-Combination-139872 and 2015-WE-DirectorWaiver-141909, July 21, 2015, pp. 12, 13.

[5] Stephen A. Lybarger, OCC Conditional Approval, Letter to Joseph M. Otting Re: Application to Merge CIT Bank, Salt Lake City, UT with and into OneWest Bank, N.A., Pasadena, CA and Request for Waiver of Residency Requirement; OCC Control Numbers: 2014-WE-Combination-139872 and 2015-WE-DirectorWaiver-141909, July 21, 2015, pp. 20, 17, 21.

[6] Id. at 22.

Here’s 7 Reasons Payday Lenders Are Worried About Their Profits

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

Payday Pay to Play

1. They’re spending a LOT of money on politicians BUT money can’t always buy you love

The payday lending industry has always “invested” gobs of money in politicians and elected officials as a way to fight off state-level regulation.  According to a new report from Americans for Financial Reform, the industry must be really worried. They spent over $15 million in campaign contributions during the 2013-14 campaign cycle. Some notable recipients include Representative Debbie Wasserman Schultz from Florida who received $31,250.  Wasserman Schultz later signed onto a letter with her Florida colleagues, suggesting that the CFPB shouldn’t make payday lending rules too restrictive.  In response, more than 20 Florida organizations that actually work with people who use payday loans (and see the damage caused by them), wrote a letter to the Florida delegation, reminding them that contrary to the marketing of these loans, the reality is that 63% of payday loan customers in Florida take out 12 or more loans each year.

 2. Regulators are clamping down on their illegal practices:

“A huge payday lending operation based in Kansas City will be banned from offering any more loans under a $54 million settlement announced by federal regulators Tuesday.”  Firms accused of faking loans, draining bank accounts settle with feds

“The Consumer Financial Protection Bureau (CFPB) is suing the NDG Enterprise, a complex web of commonly controlled companies, for allegedly collecting money consumers did not owe. According to the agency’s complaint, the defendants illegally collected loan amounts and fees that were void or that consumers had no obligations to repay, and falsely threatened consumers with lawsuits and imprisonment.”  Offshore payday lender hit with CFPB lawsuit

And, World Acceptance, one of the shadiest lenders out there, also recently shared that the CFPB is investigating it: This Payday Lender Is Being Investigated by the CFPB, and the Stock Got Crushed

3. People don’t like payday loans, in fact, 75% of people want stronger regulation of them.

The more that people learn about payday loans, the more they support regulation of them.  For example, a recent survey by the Pew Charitable Trusts finds that 75% of respondents believe there should be more regulation of payday loans.  This is an increase from 72% of respondents surveyed in 2013.
Did we mention that there have been 95 newspaper editorials written AGAINST payday lending in the past year and a half?

 

4. The gloves are off in exposing payday loan financiers

 The HuffingtonPost broke the story that a new project run by Allied Progress will expose secrets of the payday lending industry- and who profits from it:

“We’re going to do the hard work to expose who these people are and their links to some big corporations and individuals who would prefer to stay in the shadows,” said Frisch. “We’re looking at all types of predatory lending, payday loans, car titles, check cashing, bank fees. Nothing is off the table, both nationwide and in the states, if we see that we can make an impact.”

Read more here: New Project Seeks To Unmask Shadowy Payday Lenders

Another excellent resource for unmasking the folks that profit off of the payday loan debt trap and other shady companies is a website created by Unite Here, called “Loan Shark Funds”, nicknamed after the “Lone Star Fund” that is investing in payday lenders like DFC Global, which it purchased in December 2014.

Take a look: LOAN SHARK FUNDS website:

Lone Shark Funds

5. Companies are heading for the exit doors

Some companies like EZ Corp are seeing the writing on the wall.  The more people learn about payday, car title, and high cost installment loans, the less they like them.  The company announced in July 2015 that it is no longer going to originate payday, car title, or high cost installment loans.

6. Payday Money = Dirty Money  (can somebody please tell the politicians?)

Money made off of putting people in a payday loan debt trap is dirty money.  Take a look at this private school that announced it was returning donations from a payday loan company that is part of a settlement with federal authorities.

7. Banks don’t want to aid and abet this predatory profit model anymore

In this case, it’s a bank in Australia: “Westpac pulls out of funding payday lenders

According to a recent report from our allies Reinvestment Partners, (Connecting the Dots: How Wall Street Brings Fringe Lending to Main Street) there’s still some banks in the US that are willing to fund payday lenders.

Some of the largest banks include:

Wells Fargo ($WFC)

Bank of America ($BAC)

US Bank ($USB)

Capital One ($COF)

Read the report to see more excellent graphs and information like this one:

Wells Fargo Funding High Cost Consumer Loans

 

Did you like this post?   Check out a few of our other most popular payday lending posts:

95 Editorial Against Payday Lenders

CFPB Field Hearing in Richmond, Virginia Summary

The Payday Lender Hall of Shame