The New CFPB Rule is a Testament to the Power of Community Organizing

Seniors were the largest age group of payday loan borrowers in California last year but a new CFPB rule will better protect borrowers.

Dear CRC Supporter:

Yesterday, the CFPB released a new rule that will protect working families from predatory loans and the financial heartaches they create.

This rule is a victory and is a testament to the power of community organizing by CRC, our members and our allies. Borrowers will benefit from new safeguards requiring lenders to better assess their ability to repay a loan and from restrictions preventing lenders from making multiple, unsuccessful attempts to debit their bank accounts, a practice that results in costly overdrafts and closed bank accounts.

As the CFPB began its work to write this rule, CRC members and their clients courageously stepped up to share their experiences. Working with our partners, we organized listening sessions with the CFPB and with our Congressional representatives where Californians talked about how they got caught in the payday loan debt trap- a cycle of costly rollovers that are profitable for the industry, but that extract precious income and assets away from working families.

California Consumer Leadership Academy

In 2015, CRC partnered with CRL-California and California LULAC to organize the first ever California Consumer Leadership Academy.  Eight courageous women participated in this day-long training, shared their experiences, and crafted strategies on how to stop predatory lending practices in our communities.

At the CFPB’s field hearing where it announced its draft proposal of the rule, I shared the story of a Santa Cruz borrower who had worked with a CRC member after getting a payday loan and then being illegally harassed for repayment of it. We applauded the CFPB’s initial proposal, while also highlighting where we thought the safeguards could be stronger.

Once the public comment period opened, we activated consumers, CRC members and allies, and engaged with local, state, and federal elected officials to ensure the rules were as strong as possible. Consumers shared their stories in the media and we helped them to file CFPB complaints. Local mayors voiced their support. As a result of CRC and our member’s organizing efforts, the LA County Board of Supervisors passed a unanimous motion in support of strong rules. California state legislators, as well as our two senators and more than half of our congressional delegation (led by Representative Maxine Waters) weighed in with their support.

Over 100 California nonprofits also weighed in with the CFPB and our message was loud and clear: California families need a strong CFPB rule that protects their income and assets from predatory lenders.

We applaud the CFPB for its thoughtful approach to this rule and we want to extend our gratitude to our members and allies who worked tirelessly to organize and to protect our communities from predatory lending. We’re also grateful to the Silicon Valley Community Foundation for their support of this work.

We anticipate the industry will attempt to get this rule overturned- either through the courts or the Congressional Review Act, but rest assured we will continue our advocacy in support of this rule and the other work the CFPB is doing to stand up for Main Street.

My statement on the rules is now available on CRC’s website and you can read a CFPB fact sheet about the rules here.

Thank you for your support.

Paulina Gonzalez

Executive Director

New Payday Loan Facts in California

Did you hear that the Consumer Financial Protection Bureau is finalizing rules for high-cost payday, car title, and installment loans?

If you’re curious to know more about these loans, and the impact they have (mostly negative) on Californians and our state economy, then you’ll want to read CRC’s new fact sheet on payday lending in California.

It includes the latest data from the California Department of Business Oversight, as well as research on the negative drag to California’s economy created by payday loans.




You can download the fact sheet by clicking here.

If you want to learn more about payday loans in California- and the work the California Reinvestment Coalition is doing to take on predatory lending, click here and visit the CRC website.

California Lawmakers Call on CFPB for Stronger Payday Lending Rule

Payday Lenders

Have you heard?  After decades of abusive lending practices by payday, car title, and high-cost installment lenders, a federal agency, the Consumer Financial Protection Bureau (CFPB) will be releasing a new rule to better protect borrowers who use these loans.

The Center for Responsible Lending (CRL) and California Reinvestment Coalition (CRC) applauded California members of the U.S. Senate, U.S. House of Representatives, California State Legislature, city and county officials, and California Attorney General Kamala Harris who all sent official statements to the CFPB, calling on the bureau to strengthen an earlier, draft version of the rule.

In their letters, California lawmakers and attorney general highlighted that the proposed rule is a step in the right direction, but  that more needs to be done to ensure borrowers are not trapped in a cycle of debt by these predatory loans.

In California, payday lenders typically charge 366% APR on a $300, two-week loan.

Payday lenders and high cost lenders are also offering loans of $2,500 and above at 100% or higher  APRs. Consumers are especially vulnerable to this abusive practice as California does not have an interest rate cap for loans greater than $2,500.

“As elected representatives, we respectfully urge the Consumer Financial Protection Bureau to issue a strong federal payday lending rule that puts an end to the payday, car title, and high-cost installment loan debt trap nationwide” the legislators wrote.

“These high-cost unaffordable loans are detrimental to any community, but have a disproportionate impact on our African American and Latino neighborhoods. In California, payday lenders are twice as likely to be located in communities of color than in white communities, even after accounting for income. The core principle of CFPB’s proposal is the right approach—requiring lenders to ensure that a loan is affordable without having to re-borrow or default on other expenses. However, some of the details must be strengthened in order for this approach to truly work and protect Californians from predatory lenders.”

Payday lenders have invested in efforts to ward off state laws and federal regulations that would protect consumers. Some members of the California State Legislature, including California Assemblyman Ian Calderon (District-57) have pushed to weaken regulations against payday and car title lenders by calling on the CFPB to go light on rules that prevent abusive financial practices.

“This rule will create the first nationwide regulatory floor for the payday lending industry, while maintaining the prerogative of states to further strengthen their consumer protection laws and regulations as they see fit.” the attorney general wrote. “I strongly support the Bureau’s proposal to require a meaningful “ability-to-repay” standard and to curb collection abuses, as well as its proposals for structural protections to help protect consumers from being trapped in long-term, unaffordable debt.”

“Payday and car title lending significantly harm borrowers and their families. They lead to financial consequences, such as bank penalty fees, loss of cars, and bankruptcy. It’s discouraging to see that some members of the state legislature have aligned themselves with payday lenders instead of putting the interests of California families first.” explained Center for Responsible Lending Director of California Policy Graciela Aponte-Diaz. “We commend the members and the attorney general for their leadership and standing up against the payday lending industry.”

“For years, payday lenders have siphoned money out of the pockets of Californians who can least afford it,” said California Reinvestment Coalition Director of Community Engagement Liana Molina. “We applaud our state elected officials for standing up for responsible lending and we join them in urging the CFPB to finalize a rule that will protect borrowers.”

California state legislative members who signed the comment letter were:

Senators Bob Wieckowski, Mark Leno, Senator Fran Pavley, Hannah-Beth Jackson, Mike McGuire, Benjamin Allen, and Carol Liu; and Assembly Members Mark Stone, Patty Lopez, Philip Ting, Susan Talamantes Eggman, and Susan Bonilla.

The following local policymakers also called for a stronger payday lending rule:

Berkeley City Councilmember Jesse Arreguin, Menlo Park Mayor Rich Cline, Oakland Mayor Libby Schaff, San Jose Mayor Sam Liccardo, Roseville Mayor Carol Garcia, the Los Angeles County Board of Supervisors, San Mateo County Board of Supervisors President Warren Slocum, and Santa Clara County Supervisor Ken Yeager.

Additionally, U.S. Representative Maxine Waters led a group of more than 100 Congressional members in sending a comment letter to the CFPB Director calling for a stronger payday lending rule.

The California Congressional delegation members who signed the comment were: Peter Aguilar, Karen Bass, Xavier Becerra, Ami Bera, Judy Chu, Mark J. DeSaulnier, Anna G. Eshoo, Sam Farr, John Garamendi, Janice Hahn, Mike Honda, Jared Huffman, Barbara Lee, Ted W. Lieu, Zoe Lofgren, Alan Lowenthal, Lucille Roybal-Allard, Linda T. Sánchez, Jackie Speier, Mark Takano, Juan Vargas, and Maxine Waters.

Both U.S. Senators from California, Senators Dianne Feinstein and Barbara Boxer, have also signed on to a letter urging CFPB for a stronger rule.

CRL and CRC have consistently fought against abusive predatory lending practices across California. Recently, CRL and CRC sent comments to CFPB calling for the Bureau to end the payday lending debt trap and close off paths to evasion for predatory payday lenders. Read CRL’s letter here and CRC’s letter here.

As part of its rulemaking process, CFPB released its proposed rule on June 2, 2016, and has since received public comments from families, communities, and organizations. The final day for public comment was on October 7, 2016. The CFPB is expected to make its final decision on the regulations in 2017.

Why we need Operation Choke Point to stop Illegal Online Payday Lenders

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.

Operation Choke Point is the name given to the Department of Justice’s increased focus on banks and other enablers of illegal online payday loans and other scams.

Wondering why this focus is necessary?  Take a look at a recent DOJ settlement with Four Oaks Bank.

According to the complaint against Four Oaks Bank, its business relationship with a payment processor essentially allowed illegal online lenders access to customer’s bank accounts to make illegal loans, charges, and withdrawals:

As of today, approximately 97 percent of TPPP-TX’s merchants for which Four Oaks Bank permits debits to consumers’ accounts are Internet payday lenders. A payday loan typically is a short-term, high interest loan that is not secured (made without collateral) and that has a repayment date coinciding with or close to the borrower’s next payday. Most payday loans are for $250 to $700. Annualized interest rates for Internet payday loans frequently range from 400 percent to 1,800 percent or more – far in excess of most states’ usury laws.

Wonder how these loans affect the consumer? Read more from the complaint:

The design, intent, and effect of these fraudulent Internet payday lenders’ conduct
creates a false pretext to withdraw money from borrowers’ bank accounts in amounts far exceeding the reasonable understanding and expectations of borrowers. Through this process of misleading and deceptive Internet payday lending, many of the borrowers are sucked into a vortex of debt and their bank accounts are debited until they are bled dry. Moreover, as a consequence of unanticipated loan extensions, rollovers, and unanticipated interest payments debited from their bank accounts, many of the borrowers incur further harm in the form of substantial overdraft or “insufficient funds” fees from their own banks.

If you want to see the personal impacts, read these stories from the complaint:

During the 20-month period from January 2011 until August 2012, Four Oaks Bank
received at least hundreds of Requests for Proof of Authorization from borrowers’ banks in connection with debits originated by TPPP-TX on behalf of some of its Internet payday lenders. In nearly all cases, the only evidence that a debit had been authorized is an Internet payday loan contract with the kind of facially misleading and deceptive loan repayment language described above.

The borrowers who have stated under penalty of perjury that their bank accounts have been debited without authority include:

a. A.H. is a resident of Arizona, which prohibits loans with an annualized
interest rate above 36 percent. Over the Internet, A.H. received a $400
loan from Payday Lender 2, purportedly of Montana, at an annualized
interest rate of 664.38 percent.

b. L.N. is a resident of Colorado, which effectively prohibits payday lending.
Over the Internet, L.N. received a $355 loan from Payday Lender 3,
purportedly of Montana, at an annualized interest rate of 664.38 percent.

c. C.D. is a resident of Georgia, which prohibits payday lending. Over the
Internet, C.D. received a $305 loan from Payday Lender 4, at an annualized
interest rate of 762.14 percent.

d. D.H. is a resident of Maryland, which prohibits loans with an annualized
interest rate above 33 percent. Over the Internet, D.H. received a $1,000 loan
from Payday Lender 1, purportedly located in Belize, Central America,
at an annualized interest rate of 995.45 percent.

e. I.C. is a resident of Massachusetts, which prohibits loans with annualized
interest rates above 23 percent. Over the Internet, I.C. received a $305
loan from Payday Lender 5, at an annualized interest rate of 644.12 percent.

f. A.H. is a resident of Missouri, which prohibits loans in which the interest
and fees exceed 75 percent of the loan amount, and loans of less than 14
days in duration. Over the Internet, A.H. received a $500 loan from
Payday Lender 6 (operating under a fictitious name), purportedly of San
Jose, Costa Rica, at an annualized interest rate of 1,825 percent for a term of
seven days.

g. D.A. is a resident of New Jersey, which prohibits loans with an annualized
interest rate above 30 percent. Over the Internet, D.A. received a $200
loan from Payday Lender 7, at an annualized interest rate of 612.13 percent.

h. A.W. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, A.W. received a $305
loan from Payday Lender 4, at an annualized interest rate of 1,095 percent.

i. D.M. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.M. received a $500
loan from Payday Lender 8, at an annualized interest rate of 1,161.36

j. D.H. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.H. received a $200
loan from Payday Lender 7, purportedly of Utah, at an annualized interest
rate of 1,804.72 percent.

k. D.G. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.G. received a $500
loan from Payday Lender 6, at an annualized interest rate of 1,825 percent.

l. D.R. is a resident of New York, which prohibits loans with an annualized
interest rate above 25 percent. Over the Internet, D.R. received a $200
loan from Payday Lender 7, at an annualized interest of 1,804.72 percent.

m. A.F. is a resident of North Carolina, which prohibits loans with an
annualized interest rate above 36 percent. Over the Internet, A.F. received
a $600 loan from Payday Lender 1, purportedly of Belize, Central America,
at an annualized interest rate of 608.33 percent.

The California Reinvestment Coalition recently signed onto a letter with 26 other state and national consumer protection organizations, calling on the US Senate to support the efforts of Operation Choke Point, you can read the letter here.

UPDATE: If you’re angry about the damage caused by payday loans, consider signing our new petition to the Consumer Financial Protection Bureau, calling on Richard Cordray to implement strong consumer safeguards in the new rules they’re designing for payday loans.  You can sign it here: CFPB Petition

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.