New Report find Predatory Lending is Growing in California

DBO Car Title Report

new report released earlier this month by the California Department of Business Oversight provides new and disturbing data about the growth of predatory lending in California.

Liana Molina, director of community engagement at the California Reinvestment Coalition released the following statement:

“Today’s report proves that while high-cost installment and car title loans are currently legal in our state, they are causing incredible financial harm for California borrowers.

For consumer loans greater than $2,500, there is no interest rate cap, and it’s clear the lenders are taking full advantage.

Sixty-five percent of loans for $2,500-$4,999 came with interest rates of 70% APR or higher (354,696 loans). For loans of $5,000 to $9,999, thirty percent of the loans (51,236) had interest rates of 70% APR or higher.

Also troubling is that the number of car title loans increased almost 10% last year in California. This is especially disturbing since car title lenders also reported to the Department of Business Oversight that they repossessed nearly 17,000 cars from their customers in 2015. Not only are these lenders originating unsustainable, high-cost, predatory loans, but thousands of people (about 15% of their customers) lost their main mode of transportation as a result of obtaining a car title loan. Even worse, of the 16,989 borrowers who had their cars repossessed, 10,357 of them had a deficiency balance, meaning the lender will continue to harass them for more money beyond just taking their car.

The Consumer Financial Protection Bureau (CFPB) announced new, proposed rules earlier this month that would create national, uniform rules for payday, car title, and installment loans. While the CFPB’s proposed rules are an excellent first step in curbing the many abuses we’ve seen from this industry, there remains several loopholes that we believe the CFPB should eliminate in the final rule.

How can I help stop predatory lending in California?

We are working with our members, allies, and consumers to urge the CFPB to implement a strong, final rule that has NO exceptions for the industry to exploit.

Join CRC by signing our petition and urge the CFPB to prioritize strong consumer safeguards and responsible lending, NOT predatory lenders.

8 Reasons Not to Get an Online Payday Loan

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.

While online payday loans are advertised heavily on the internet, consumers should be very, very wary of giving out their personal information on the internet.  It may appear that you are giving your personal information to a lender, but oftentimes you are giving your personal information to a lead generator, who will then take your information and sell it to lenders, oftentimes to multiple lenders.  Or, they may sell your information to companies who contact you and harass you to try and collect money for loans you never received, as the stories below demonstrate.

We will continue adding stories about the dangers of applying for online payday loans, so check back soon.

8.  The owner of two online payday loan businesses that charged interest rates ranging from 89% to 169%, plus fees, will no longer be doing business in Pennsylvania. According to the state’s Department Banking and Securities in Harrisburg, Pa., the Anaheim, Calif.-based companies were not licensed by the state and made loans to more than 18,000 consumers for more than seven years. Pennsylvania Bans Online Payday Lender (Peter Strozniak, Credit Union Times. July 25 2014).

7. Many online payday loan companies will sell off the contact information provided when you got the loan. They will also sell off the lists of individuals who may not have repaid the loan, although the loan may have been illegal in the first place. This information then gets diffused among some of the most unethical, illiterate and inconsiderate scam artists on the planet, who will in the future start to phone or email the names on the list. Scams engender fear of legal consequences (E. Kent Winward, Standard Examiner. July 25, 2014)

6. Consumers say they were contacted after filing out loan applications online. Some of the applications were on Cash Advance USA or Fast Cash USA’s websites. Others say they filled out applications on sites that appeared unrelated. The victims say they were told to make upfront payments but never received their loans.  Bogus payday loan offers siphon money from victims (Kimberly Essex, 48WAFF.com July 24, 2014)

5.  Tiffany Kelker was stuck. In January 2011, finding herself in need of some financial assistance after the holidays, she had taken out a $600 “payday loan” from an online lending business that advertised fast cash. In the ensuing months, however, the Billings, Mont., mother of five watched as the company withdrew money electronically from her bank account, according to court documents. Eventually the lender took more than $1,800 in interest charges alone, which court records calculated as an annual percentage rate of 780 percent. Kelker would eventually file suit against Geneva Roth Ventures Inc., an Internet-based lending operation headquartered in Mission, Kan. Payday loan case showcases brutal interest rates in an industry under fire  (Dugan Arnett, Kansas City Star, July 19, 2014)

4. “According to the complaint, the defendants used consumers’ personal financial information it had collected through its websites to withdraw $30 from the bank accounts of tens of thousands of consumers, without authorization and without providing anything of value in return. ‘These defendants deceived consumers to get their sensitive financial data and used it to take their money,’ said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. ‘The FTC will continue putting a stop to these kinds of illegal practices.’” Phony Payday Loan Brokers Settle FTC Charges (FTC Press Release, July 11, 2014)

3. “Many consumers in this case were victimized twice,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “First when they inquired about payday loans online and their personal information was not properly safeguarded, and later, when they were harassed and intimidated by these defendants, to whom they didn’t owe any money.” At the FTC’s Request, Court Halts Collection of Allegedly Fake Payday Debts (Federal Trade Commission, July 1, 2014)

2. “The scammers use your personal information to hack your bank account and steal your identity. Remember, the information they purchase from the website lead generators includes names, addresses, phone numbers, social security numbers, bank account numbers, routing numbers, email addresses and even IP addresses. ” Payday loan pretender comes clean (Connie Thompson, KOMOnews.com, June 19, 2014)

1.  “Once you made that application, you basically sent up a red flag with them that you are someone in need of this money, and you need it on a short-term basis,” he told me. “That’s when the vultures come out.” I Applied For An Online Payday Loan. Here’s What Happened Next (Pam Fessler, NPR News, November 6, 2013)

CONSUMERS:  Have you had a bad experience with an online payday loan?  You should file a complaint with the Consumer Financial Protection Bureau.  Not only will it likely help with your case, but you’ll be giving this agency important information as they design new rules to regulate payday lending this year.  You can file a complaint with the CFPB here, and you can read about their work on payday lending, including enforcement actions here.

Action step: If you’re angry about what you read, 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.

Five of the most obnoxious debt collection tactics ever seen

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.

 

5 Debt Collector Stories

The Consumer Financial Protection Bureau has asked the public to share their recommendations on rules they are designed for debt collectors.  If you’ve ever had a bad experience with a debt collector, (like harassing phone calls, calling the wrong person, making up amounts that you owe, etc) then you should spend 5 minutes to share your experience with the CFPB. (Click here to add your comments). Your five minutes today can help ensure that consumers aren’t left behind when these rules are designed.  There’s not much time left- comments are due by February 28, 2014.

There are more stories out there, and the CFPB needs to hear them.

These are five example of some of the more obnoxious debt collector tactics:

1) Threatening a senior citizen that you’ll put them in jail if they don’t pay their debts.

2) Calling a cell phone company and impersonating a person’s father in order to be added to their cell phone account in order to get personal details about them, and then sending text messages to them calling them “Fat  Pig” and a “200 pound slob.”

3) Sending an Illinois breast cancer survivor to jail for a debt she didn’t owe.

4) Using racial slurs (while racist, illegal, and obnoxious, the good news is that the recipient of these calls  successfully sued the debt collector for $1.5 million).

5) Threatening to dig up a dead family member’s body.

If you’ve had similar bad experiences with a debt collector, NOW is the time to speak up.  It’s a very simple process- you simply visit this website  and share your experience by clicking on “COMMENT NOW.”  If you have suggestions on how the CFPB can design the rules, be sure to include them.

The clock is ticking- the CFPB is only accepting comments until February 28, 2014.