8 Important Points from the CFPB Field Hearing on Payday Lending in Richmond Virginia

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.

Did you miss the CFPB hearing on payday and other high cost loans?  Not to worry, advocates and consumers from around the country testified at the hearing about their experiences with payday and car title loans and we’ve got the highlights below!

1) Ending predatory lending is a top priority of the CFPB and of President Obama: President Obama signaled the importance of putting an end to predatory lending in a speech he gave Thursday in Birmingham, saying, “As Americans, we don’t mind folks making a profit,” Obama said. “But if you’re making that profit by trapping hardworking Americans in a vicious cycle of debt, then you need to find a new business model. You need to find a new way of doing business.”

Watch President Obama’s speech here (payday lending starts at about 15 minutes in):

 

2) When consumers share their stories about payday and car title loans, it isn’t pretty:

ELLIOTT CALLOUT EMAILIt started with a broken ankle and a $500 payday loan. It ended in a three-year ordeal that cost Elliott – a Marine Corps veteran – his wife, and five daughters more than $30,000 and their house…read more here from the PICO National Network.

From a Guardian article about hearing: “I would tell anyone at this point: don’t do it. Do not do it. If I had known what I know now about payday loans, I never would have looked their way,” he said.   The Guardian: Payday loan borrowers: ‘When are we going to be done paying these people?’

Consumers also shared their experiences during the public comment period- below are retweets about the stories:Car Title borrower

payday borrower

New Economics For Women shared a consumer story that illustrates how the debt cycle works:

When Lorena (Alias), of Los Angeles, CA, found herself in a tight financial spot, she turned to payday lending….She visited a Speedy Cash location in Los Angeles, CA and borrowed $255, paying $45 in fees and hoping to be able to pay it back in two weeks time….Unfortunately, that was not enough time for her to stabilize her finances, and she had to repeat the loan. She has now repeated the loan 7 times, paying $315 in fees alone….Not only has she had to pay the added $315, she has also acquired overdraft fees. On five occasions, Speedy Cash has taken the money out of her bank account while she was still waiting on disability checks to come in, adding $175 to her expenses, due to payday lending….Hoping to catch up on some of her expenses and be able to get rid of the initial payday debt, she took out a second loan at Speedy Cash for $2,600. However, that loan did not help her at all and has instead dragged her deeper into the cycle of debt. In addition to the repeat loans every two weeks, Lorena now has to pay $38 every two weeks to repay the $2,600 loan. She has fallen behind on her bills and rent and has reached out to family and friends for help. Currently she owes Speedy Cash $2,755 and can only see that amount growing as time goes by.

3. Besides personal stories, research on payday and car title loans has found the products are toxic for the majority of people who use them- pushing them deeper into a cycle of debt.

From a new Pew research report on car title loans:

  • Between 6 and 11 percent of title loan borrowers have a car repossessed annually.
  • To repay a title loan, 47 percent report using a cash infusion, such as a tax refund.
  • 66% of car title borrowers believe the industry should be more regulated.

4. Advocates and practitioners advocate based on the stories and experiences of the people they work with:

Adam Rust, Research Director at Reinvestment Partners, spoke about his organization’s work in housing counseling and providing free tax preparation services.  He agreed that they see people facing difficult financial situations, but explained that paydayloans won’t right the ship- instead they’ll only cause people more hardship.

Paulina Gonzalez, executive director of the California Reinvestment Coalition explained in her testimony that “in many of our communities, we need more income, not just credit.”

5. People across the country are concerned about high cost lenders trying to use loopholes to escape regulations- or using cash to wield influence:

NC AFL CIO

lobbyists

6. While the industry tried to play the “we create jobs card” it turns out that’s not true either:

According to a report from the Insight Center for Community Economic Development, the payday loan industry was responsible for a net loss of over 14,000 jobs in 2011, and a net economic loss of over $750 million.  Bankruptcies that are triggered by payday loans were responsible for another $169 million net economic loss.

7. States like North Carolina and New York that got rid of payday lenders don’t want them back.  

Carlene McNulty, an attorney from the North Carolina Justice Center, commented that North Caorlina had kicked payday lenders out ten years earlier- and the state doesn’t want them back.

NY payday loans8. Communities notice where payday loan companies locate their stores- and where they don’t:

Where do payday lenders locate

 

Want to learn more about payday and car title loans?  We have a few resources:

1.Over 70 editorials have been written about payday lending- Has your local newspaper written one yet? Take a look: Editorials against payday lending  

2. Ever wonder why people are concerned about payday loans and some of the companies that make them?  Is it the high interest rates? The debt traps they create for their customers?  Their shady collection tactics?  The amount of money they spend lobbying state legislators in order to protect their profits instead of their customers? Maybe it’s the extra fees they don’t disclose? All of the above?  Check out the Payday Lender Hall of Shame.

3. It’s not just payday loans that can be dangerous to your health- it’s also high cost car title loans and high cost installment loans too: Careful! Alternatives to Payday Loans Can Also Be Predatory

4. Thinking about an online payday loan?  Here’s 8 strong reasons not to! (hint: if you don’t like having your identity stolen, steer clear!)  8 Reasons Not to Get an Online Payday Loan

 

Why Do Hundreds of Organizations Want Strong CFPB Rules For 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.

 

ACE Cash Express

Training Manual from ACE Cash Express on how to keep consumers stuck in the debt trap. Obtained as part of CFPB settlement with the company.

In October this year, 466 organizations signed onto a letter to the Consumer Financial Protection Bureau, urging the agency to design rules for payday loans that would end the so-called debt-trap.

What is the debt trap?  Well, imagine you’ve run short on money for the month, so you think you’ll use a payday loan to make ends meet (after all, that’s what their marketing tells you it’s for, right?).  Unfortunately, two weeks later, when you’re expected to repay the loan, your income situation may not have changed, meaning you don’t have enough to pay back the loan and have enough money left to pay your regular bills.  So, you pay back your loan, and take out a new one.

This cycle repeats itself over and over and over again.  In fact, new research from our colleague at the Center for Responsible Lending, finds that lenders generate 76% of their revenue from borrowers who take out 7 or more loans per year.

This research, once again, contradicts industry claims (and marketing) that the loans are for “one-time, emergency use.” In fact, the loans are designed to keep people in debt because that’s how the industry makes its profits.

You can read the more in-depth letter, (link here) written by Americans for Financial Reform to get a better understanding of the problems with payday loans and the ways that the CFPB can address the problems and protect consumers.

If you’d like to stay informed as the CFPB develops these rules, sign our petition to the CFPB, and we’ll keep in touch. Also, if you have a story you’re willing to share about payday loans, we’d also appreciate your input:  Petition to CFPB

The letter struck a nerve in California, where 35 organizations signed onto it, many of whom are CRC members and allies:

Asian Law Alliance
California Association of Food Banks
California League of United Latin American Citizens (LULAC)
California Partnership
California Reinvestment Coalition
CALPIRG
City Heights Community Development Corporation
Community Legal Services in East Palo Alto
Consumer Credit Counseling of San Francisco
Consumers for Auto Reliability and Safety
East Bay Community Law Center
East LA Community Corporation
Faith in Community
Habitat for Humanity Greater San Francisco
LA County Consumer Affairs
Labor Community Services
Law Foundation of Silicon Valley
Mission Assets Fund
Mission SF Community Financial Center
Mutual Housing California
New Economics for Women
Northbay Family Homes
Nuestra Casa de East Palo Alto
Opportunity Fund
Public Counsel
St. Joseph’s Family Center
T. Cooke and Associates
The Fair Housing Council of San Diego
Treasurer, City and County of San Francisco
United Policyholders
United Way Silicon Valley
West Valley Community Services
Working Partnerships USA
Yolo Mutual Housing Association
Youth Leadership Institute

Want to Honor Vets? Stop Gouging Them With Payday Loans

California Advocates Suggest California Members of Congress and California State Legislature Could Honor Veterans By Strengthening Protections Against Predatory Payday Loans

Veterans and Loan Sharks

The California Reinvestment Coalition and the Center for Responsible Lending issued a call today, urging state and federal lawmakers to consider strengthening protections for veterans and their families.  Earlier this year, the Department of Defense released proposed rules to update enforcement of the Military Lending Act, which was passed in 2007.  An update is necessary because of shady lenders exploiting loopholes in the 2007 law.  With more than 1.8 million veterans, California is home to the nation’s largest number of veterans. California also has the nation’s largest active duty military population—over 160,000 service members.

The vicious cycle of debt is not a side effect of payday lending it is the business model. A Center for Responsible Lending analysis shows that California payday lenders, who advertise their products as a one-time quick fix for consumers facing a cash crunch, generate 76% of their revenue from borrowers who take out 7 or more loans per year. A map of California payday lending locations shows the lenders cluster in low-income communities.

Also, have you heard about the upcoming CFPB rulemaking on payday loans?  We need all hands on deck to make sure the process results in strong rules that protect consumers—not payday lenders!  Sign our petition to the CFPB and we’ll also let you know when the public comment period opens and if there are upcoming advocacy opportunities:  Payday Loan Petition to Richard Cordray

And, if you’re interested in learning more about payday loans and the harms they cause, check out a few of our most popular posts from earlier this year:

1) EDITORIALS AGAINST PAYDAY LENDERS

2) SEVEN IMPORTANT UPDATES ON PAYDAY LENDING IN CALIFORNIA AND NATIONALLY

3) CAREFUL! ALTERNATIVES TO PAYDAY LOANS CAN ALSO BE PREDATORY

4) THE PAYDAY LENDER HALL OF SHAME

To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via TwitterGoogle+, watch our movies on our YouTube Channelsign up to receive our newsletter and action alerts, and of course, visit our website.

Service Members Deserve More Transparency From On-Base Banks, Credit Unions

New research from Pew on banks at military bases and how well information is disclosed to servicemembers.  As a reminder, you can also check out our report from earlier this summer that we conducted with our partners in North Carolina, New York, Illinois, and California: HOW BANKS SELL OVERDRAFT: RESULTS OF OVERDRAFT MYSTERY SHOPPING IN FOUR KEY STATES

Six Reasons the Narrative of Complaints Should be Included in the CFPB Complaint Database

Editor’s note: CRC submitted a copy of the letter below in support of the Consumer Financial Protection Bureau adding complaint narratives to the CFPB’s complaint database.

September 22, 2014
The Honorable Richard Cordray
Director, Consumer Financial Protection Bureau
1700 G Street N.W.
Washington, DC 20552

Re: CFPB Complaint Narrative Comments, Docket Number: CFPB-2014-0016

Dear Director Cordray,

The California Reinvestment Coalition represents about 300 community based non-profit and social service agencies across California that serve low and moderate income communities, including communities of color, immigrants, women, and rural communities. While our members work directly with households and small businesses to protect against financial losses such as foreclosure and to build financial capabilities and assets, CRC advocates for reforms among financial services providers and their regulators that will lead to better access to affordable, high quality financial products and practices.

We write today in strong support of the bureau’s proposal in this docket to expand the highly successful Public Consumer Complaint Database to include narrative fields.

Currently, consumers that submit complaints know only that their complaint will be seen by the company about which they are complaining. There is no assurance that anyone at the CFPB will read it, follow up to ensure a meaningful response, or use the consumer’s experience to pursue a regulatory of enforcement action. As a result, companies can freely provide pro forma responses that do not actually address the consumer’s concerns. After all, no one but the complainant is likely to see or respond to the company’s action. An inadequate response to a complaint can leave a consumer completely out to dry, left to pursue the issue outside of the CFPB or any regulatory arena, in favor of other forums where the court of public opinion reigns such as Facebook or Twitter, or, if they have the resources to do so, pursuing private legal action. While that consumer may achieve her goals, all information about that interaction is lost to other consumers and regulators.

We encourage the CFPB to add more detailed information to the database, including complaint narratives, detailed complaint categories and subcategories, complaint resolution details, consumer dispute details, and data regarding membership in classes protected from discrimination by law. We support using technology to both give consumers the right not to provide details, using technology to scrub identifying information, and taking steps to prevent the release of personally-identifiable information or the re-identification of consumers. It is critical that the bureau achieve the disclosure of more individual complaint details while simultaneously making every reasonable effort to protect personal data. Finally, we also support allowing financial institutions to provide a reply narrative and making this available to consumers, researchers and other firms.

By allowing consumers to publish the content of their complaints, and institutions to publish response narratives, the CFPB will dramatically help level the playing field on which consumers engage with financial institutions in several ways:

  1. With access to greater detail about others’ experiences with a financial service provider, consumers can make more informed decisions about which companies to work with.
  2. Consumers that submit complaints will know that they are helping others by publishing their experience, not merely submitting a complaint in hopes of solitary relief or potential enforcement or regulatory action by the CFPB that they may never know about.
  3. The CFPB, consumers, researchers and financial institutions alike will be able to better identify bad practices in need of reform as well as effective responses to complaints and other good practices.
  4. Researchers and regulators will be able to more quickly and accurately identify practices that can lead to system wide crises.
  5. Knowing that complaint information and resolution can be made public, providers are more inclined to provide better responses to complaints submitted rather than pro forma responses that may never be seen by anyone other than the complainant.
  6. More consumers will use the database before, during and after their engagement with a services provider, yielding more data that can help the industry improve products and services.

We also urge the CFPB to expand their proposal to allow consumers to update their complaint narratives. This will ensure that important information is not lost, such as whether the complaint was adequately addressed or if new related issues have come up. Such new information can be identified as dated “updates” to the original complaint.

Sincerely,

Andrea Luquetta, Policy Advocate

 

Payday Lending Reform Strategy Convening, Los Angeles, 10/10/2014

Los Angeles convening on federal options for reforming payday lending, via the Coalition Against Payday Predators.

Coalition Against Payday Predators

LA Payday Convening invitationPlease join a broad coalition of Southern California-based anti-poverty, Labor, legal services, advocacy, social services, and consumer rights leaders to discuss the achievable local, state-level, and federal options for reforming predatory payday lending.

More information about the Convening here.

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