Advance America Payday Lender 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.

 

As the payday, car title, and installment loan industry is trying to fight the upcoming CFPB regulations, one of the claims they try to make is that store-front locations offering loans are far more legitimate and far less likely to take advantage of customers as compared to online lenders. We’ll agree that online lenders are also shady (read our post here:  8 Reasons Not to Get an Online Payday Loan)

Let’s examine this claim that storefront lenders are less shady.  First, it’s impossible to ignore the predatory rates they charge their customers, and the fact that 4 out of 5 of their customers are forced to renew their loans because the loan repayment terms are unrealistic.  These loans are allowed to be offered this way in many states because the industry has been so prolific at bribing…er…investing…er….making campaign contributions to state legislators who write the rules.  And, the industry has a well-documented history of using questionable smear tactics to defeat state legislation that would better protect consumers.

Put aside their bad products that are legal but predatory, and let’s move onto the claim that all storefront payday lenders follow the rules.  It turns out, that’s not the case either.  In fact, some car title, and instalmment lenders also don’t follow state laws, and as a result, are forced to settle with regulators and with attorneys who sue them.

In our first edition of “Payday Lender Law Breakers,” we’ll take a look at Advance America and its checkered history of settlements.

Shark payday 2

 There’s been a lot of them, so if we missed one, let us know in the comments section!

2015: State of Pennsylvania $22 million settlement: According to Lancaster Online, under this settlement, Advance America will pay $8 million in restitution, forgive unpaid balances of about $12 million, and pay another $2 million to the state for legal costs in administering the settlement.  Read more here: Payday lender Advance America to return $8M to Pa. consumers in settlement

2010: Missouri: Advance America agrees to settlement worth at least $5.8 million in cash and debt forgiveness to a class of Missouri residents.  Read more here: Payday Lender To Shell Out $6M In Class Settlement

2010: North Carolina: Advance American agrees to $18 million settlement in North Carolina: Read more here: Payday Loan Lawsuit Brings $18 Million Settlement Against Advance America

2010: South Carolina: Advance America part of $2.5 million lawsuit in South Carolina against payday lenders. Read more here: Payday Loan Class Action Settlement

2009 California: State of California Dept. of Business Oversight Settlement: In 2008 the Department conducted regulatory examinations of various Advance
America locations.  The examinations cited purported violations of the CDDTL, including that Advance America allegedly collected excess amounts from customers that made partial payments on their loans, allegedly collected NSF fees on returned checks that were deposited after customers made partial payments on their loans, allegedly failed to refund finance charges to customers that paid off their loans the next business day following origination, and allegedly conducted deferred deposit transactions at an unlicensed location (hereinafter collectively “Exam Findings”). Advance America disputes and denies the Exam Findings.  Read more here: State of California Settlement Agreement and Desist and Refrain Order

2009: Georgia Settlement: Press release: Advance America Announces Settlement in Georgia and the Closing of 24 Centers in New Hampshire

2009 Arkansas Settlement: Read more here:  http://www.stoppaydaypredators…

 

CRC resources on predatory payday, car title, and installment lending

Share Your Story about payday, high cost installment, or car title lending- It only takes 3-5 minutes. By sharing your experience, you can help take a stand against predatory lending and help the CFPB understand why consumers need strong rules to limit predatory loans.

Editorials Against Payday Lending Newspapers around the country are weighing in!  Check out this extensive compilation of 109 editorials (and counting!) against the debt traps created by payday and other high cost loans:

Payday Lender Hall of Shame: If you thought payday lenders are here to help, read this shocking expose of their worst practices.  Some truly shocking behavior!

North American Title Loans Repossess Car from Injured Consumer.  Watch this PBS NewsHour segment about TJ McLaughlin, whose car was repossessed after he couldn’t make payments because of a health problem.

Testimony from California Reinvestment Coalition on Consumer 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.

 

On January 11th, the California Assembly Committee on Banking and Finance held a hearing, “Small Dollar Consumer Lending in California.”

Paulina Gonzalez’ testimony is featured in its entirety below.  After reading her testimony, you may also be interested in seeing CRC’s other resources on payday lending, linked below.  Want to join the conversation and share your experience? Visit #StopTheDebtTrap on Twitter and join the conversation!

Paulina Gonzalez Testimony on Small Dollar Consumer Lending

I am the Executive Director of the California Reinvestment Coalition.  We are a statewide financial and economic just coalition with over 300 organizational members across the state.  I know firsthand the needs of our communities, not only from the work that I do and the communities that CRC represents, but I know this because this is the community that I come from.  I grew up in working class south Montebello, in an immigrant family where we struggled to make ends meet.  But luckily for us, we never had the option of taking out a payday or installment loan that would have left us in a worse situation.

CRC’s members work on the front lines of California’s low income communities and communities of color.  Our members are affordable housing developers, CDFI small business lenders, asset building organizations, and tenant rights organizations.

Our membership serves the constituencies that are the target of the aggressive marketing and outreach efforts of high cost lenders, and they are located in low income communities where payday loans and installment loan store fronts are heavily concentrated.  They serve the constituency that therefore often fall prey to these high cost products.

The lobbyists and corporate executives of the predatory lending industry say that they know our community needs and that they our providing a service with their products by helping families during an emergency when they can’t pay their rent or when their car breaks down.  They say that they provide a last ditch option when our communities have no other option.

But really the so called service they are offering is analogous to offering a starving man poisoned food.

These products leave families in a worse situation than when they started; they leave families thousands, if not tens of thousands of dollars in debt paying 100-500% above the principle over the term of a loan.

CRC agrees with the general goal and principal of expanding access to credit for our communities, particularly for under-served populations, however we want to ensure that the credit that is being offered is fair, affordable, responsible credit, not high-cost predatory loans that trap borrowers in a cycle of debt.

We do not believe that high cost credit, in other words, that poisoned food, is the solution for our communities.

We are concerned about the weak legislative and regulatory framework governing payday lending below $300 and car title and installment lending over $2,500.  The failure to regulate this lending space at each end of the lending spectrum allows for lenders to conduct high cost predatory lending with impunity in this space.

At one end of the spectrum, in the under $300 range you have unregulated interest rates and APRs as high as 450% on these loans.  In addition, you have a business model that relies on repeat borrowing.  The CFPB just last year took an enforcement action against ACE Cash Express, one of the largest payday lenders in the country. They found that ACE used illegal debt collection tactics – false threats of lawsuits or criminal prosecution – to pressure overdue borrowers into taking out additional loans they could not afford.  This is the profit making model these lenders rely on, as evidenced by their employee training manual.

On the other end of the spectrum, in the above $2,500 range, the business model is based on triple digit interest rates that force consumers into loans that can take a decade to pay off and can cost tens of thousands of dollars above the original loan cost.

Imagine paying $30,000 on a $5,000 loan.  Does that sound like a service to you? Or does that sound like poisoned food?

Consumers in the middle lending space, that encompasses the pilot program, have the most protections.  There is a usury cap, some underwriting, and there is reporting to credit agencies.

What we should be discussing is strengthening the middle lending space, extending the protections of the pilot to more people by regulating the $300 payday lending space and the above $2,500 lending space.

Our  current concern with each end of the lending spectrum is that lenders are offering these products without assessing the consumer’s ability to repay, thereby forcing consumers to choose between re-borrowing, defaulting, or falling behind on other obligations, we are also concerned about certain payment collection practices that can subject consumers to substantial fees and increase risk of bank account closure.

Consumers need better protections for consumer loans, across the board, from payday to car title to installment loans, such as:

  • underwriting requirements that take into account income and expenses to ensure borrowers have the ability to repay the loan
  • interest rate restrictions and fee caps of 36% APR or less
  • protections against expensive, long-term debt such as limits on re-borrowing and refinancing

We’re encouraged by the forthcoming CFPB rule and we are working hard to win strong reforms and establish a national floor for consumer protections, we believe it’s premature to change the CFLL, given the impending changes in federal regulatory requirements.

If the legislature is going to proceed anyway, the focus should be on regulating each end of the lending spectrum and leveling the lending playing field to protect consumers from high cost predatory loans and therefore expanding access to responsible affordable credit.

CRC resources on predatory payday, car title, and installment lending

Share Your Story about payday, high cost installment, or car title lending- It only takes 3-5 minutes. By sharing your experience, you can help take a stand against predatory lending and help the CFPB understand why consumers need strong rules to limit predatory loans.

Newspapers around the country are weighing in!  Check out this extensive compilation of 109 editorials (and counting!) against the debt traps created by payday and other high cost loans: Editorials Against Payday Lending

Payday Lender Hall of Shame: If you thought payday lenders are here to help, read this shocking expose of their worst practices.  Some truly shocking behavior!

North American Title Loans Repossess Car from Injured Consumer.  Watch this PBS NewsHour segment about TJ McLaughlin, whose car was repossessed after he couldn’t make payments because of a health problem.

 

North American Title Loans Repossesses Car from Injured Customer

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.

 

How does the debt trap work?

Watch this PBS NewsHour episode about T.J. McLaughlin, who had to take some time off work after a medical problem.  Short on money for bills, he borrowed $1,200 from a car title lender (North American Title Loans), at 300% interest rate.  But when he lost his job and was unable to make the payments on this loan, they took his car.

If you’re in California and have had a similar experience with car title, payday lender, or high-cost installment loans, please share it with CRC (Click on this link to share your story- it only takes 3 minutes).

The CFPB (Consumer Financial Protection Bureau) is writing rules about high-cost payday, car title, and installment loans. By sharing your experience, you can help the CFPB understand how to make these products safer.  Ultimately, that can mean fewer people going through financial heartaches like the one TJ McLaughlin experienced.

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

 

How Californians Are Working to #StopTheDebtTrap created by Payday and other High Cost 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 year, the Consumer Financial Protection Bureau announced  new federal rules under consideration for payday, car title and other high cost consumer installment loans.

Paulina Gonzalez, Executive Director of the California Reinvestment Coalition attended the CFPB’s field hearing in Richmond, Virginia, where the draft proposal was unveiled. Gonzalez testified on the consumer panel about the need for federal reforms.

Back in California, CRC members and our allies have been busy organizing to support rules with strong consumer protections that must require lenders to assess borrowers’ “ability to repay” before extending them a loan. If you are an organization that’s interested in getting involved, please contact CRC’s payday organizer, Liana Molina: liana@calreinvest.org.

If you’re a consumer, please consider sharing your story with payday loans in our short survey.  Sharing your story can be an important way to help clean up this industry!

Some pictures from our work during the past few months are included below.

In October, community advocates sponsored and organized a Southern California Payday Reform Strategy Convening in Los Angeles to discuss the current state of payday lending, the proposed CFPB rules, and the impasse for consumer protection legislation in Sacramento. The picture below is Representative Maxine Waters, Ranking Member of the House Financial Services Committee along with Hernan Vera, who was president of Public Counsel at the time of the convening.

Payday Loan convening

In December, the Coalition Against Payday Predators, a coalition CRC belongs to, held a rally at a payday loan store in San Jose.  Representative Zoe Lofgren spoke at the rally, as did Dr. Emmett Carson, the founding CEO of the Silicon Valley Community Foundation.

 

Rep. Zoe Lofgren speakout against payday loans

In April, 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.

California Consumer Leadership Academy

LA and Bay Area Trainings on CFPB proposed rules and filing complaints. In April and May, CRC organized two trainings, titled: “”Winning and Defending Strong CFPB Rules to End High-Cost Debt Traps” where we worked with local service providers to explain the CFPB proposal, the importance of it, and how to file CFPB complaints with or on behalf of the consumers they work with.

April Training in San Francisco at Mission Economic Development Agency

Stop The Debt Trap

May Training at the Community Center at Sol Y Luna Apartments, in partnership with the Center for Asset Building Opportunities and the East LA Community Corporation

Stop the Debt Trap LA

The picture below is of CRC, CRL-California and National Council of La Raza staff  at the NCLR Latino Policy Summit, where we presented on the status of payday lending in California and the current CFPB rule making process. CRC also presented at the Housing Rights Center Summit in Los Angeles and Housing California’s conference in Sacramento.

Stop the Debt Trap NCLR

Finally, CRC has been leading the charge in organizing our members and partners in outreach, education and advocacy work with members of Congress representing various congressional districts across the state. The CFPB will need strong political support to propose, enact and defend strong consumer protections.

Share Your California Payday Loan and Car Title Loan Stories

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.

 

Have you ever used a payday, car title, or other high-cost consumer loan?

Have you heard the news?

A federal agency, the Consumer Financial Protection Bureau, is designing new rules to better regulate companies who make car title, payday loan, and other high-cost consumer loans.

CRC’s executive director, Paulina Gonzalez, testified at the CFPB hearing where the proposed rules were announced.

This hearing was only the first step, and the industry is already fighting back against common-sense protections.

If you have used one of these loans in the past, consider sharing your story with CRC as we advocate for common-sense consumer protections in the new rules.

Take a look and share your story:  Share Your Story to Ensure Strong Consumer Protections.

John Oliver and Sarah Silverman on 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.

If you haven’t watched it yet, John Oliver and Sarah Silverman have an AWESOME segment on payday lenders and why they are so scuzzy.  Check it out, and after you watch it, consider signing CRC’s petition to the CFPB, calling on the CFPB to put customers first when they design new rules for payday lenders.

Still fired up?  Check out CRC’s collection of 45 editorials against payday lenders,  Our Payday Lender Hall of Shame, or our recent update on Seven New Laws, policies, and settlements related to payday lending.