California Reinvestment Coalition Goes to Washington

Last week, members of the California Reinvestment Coalition traveled to Washington, DC, for the annual National Community Reinvestment Coalition conference.  The theme this year was “Creating a Just Economy.”

Keynote speakers during the conference included Federal Reserve Chair Janet Yellen, CFPB Director Richard Cordray, Representative Maxine Waters who is Ranking Member of the House Financial Services Committee, Comptroller Thomas Curry, Senator Sherrod Brown who is Ranking Member of the Senate Banking Committee, Mark Morial, CEO of the National Urban League, and John Taylor, president and CEO of NCRC.

There were a number of sessions focused on reinvestment, affordable housing, small business lending, home ownership, gentrification, economic development, CDFIs, community health benefit agreements, fintech, rural development, fair housing, the racial wealth gap, the Community Reinvestment Act, redlining, and more, including a session entitled “Defending the CFPB” that Paulina Gonzalez, executive director of CRC, moderated.

In addition to attending the conference, CRC members also met with members of the California Congressional delegation and with bank regulators and their staff as well.  During the meetings, CRC members shared what they are seeing from their work in communities, specifically around issues related to small business lending, affordable housing and economic development.

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The president’s so-called “skinny budget” proposal was one of several topics covered at the meetings, and more background about the additional issues is included below.

Program/Department

Budget Proposal Impact on California

HUD Budget 

Eliminates CDBG, reductions for key programs serving renters Loss of $357 million in CDBG funds for CA cities;

$130 million in HOME funds for new affordable housing; Thousands of tenants to lose rental assistance vouchers;

More costs for Medicaid as seniors move to nursing homes w/o Meals on Wheels;

Increased homelessness;

CDFI Fund

Eliminated

Fewer loans, less support for Small Biz Owners. There are 86 CDFIs in CA that made 39,000+ loans in FY 2016.

Legal Services Corporation

Eliminated

11 CA orgs. receive funding through LSC.

Small Business Administration

Prime program defunded; Microloan program frozen Less financing available for CA small businesses.

NeighborWorks

Eliminated

Will harm efforts at building assets, including for 1st time homebuyers, also negative impacts for affordable housing.
AmeriCorps Eliminated

Work on tax returns, literacy, emergency response, health, and economic development.

 

Community Reinvestment Act

This year, CRA celebrates its 40th anniversary. Because of the CRA, financial institutions are helping to meet important community credit needs and building consumer and community wealth, through small business lending, mortgage lending, affordable housing finance, community development activity and bank branch and account access.

  • California Reinvestment Coalition members and other community groups have recently negotiated win-win community commitments with a number of banks, including City National, Bank of Hope, Cathay Bank and Mechanics Bank.
  • But bank regulators need to be more rigorous and timely in their CRA and Fair Lending examinations of banks. Wells Fargo had not had a CRA rating made public in 9 years, and several banks, such as BancorpSouth and Evans Bank that received Satisfactory CRA ratings were later sued for redlining.
  • Regulators should encourage banks to develop Community Benefit Plan agreements with local community groups, and incorporate these agreements into any bank merger approval and subsequent CRA exams.
  • Regulators should also provide CRA downgrades to institutions that engage in discriminatory, unfair, or deceptive practices, or that finance the direct or indirect displacement of low and moderate income people and communities of color, or that finance lenders who make predatory loans in these communities. Banks must diversify management and staff, and develop robust supplier diversity programs.


Rural Communities

Rural communities in California face unique and significant challenges. Banks are well placed to help local communities develop and grow through home mortgage and small business lending, affordable housing investments and low cost accounts.

  • But nonprofit groups and even some banks report that banks only lend and invest in geographic areas that are subject to “full scope” regulatory review (via CRA exams),  that tend to focus on larger, urban areas, especially for the largest banks.
  • Bank regulators should expand the number of full scope areas for banks that are among the biggest depositories and lenders in smaller, rural communities. Branch closings, especially in rural areas, are also effectively limiting access to banking for consumers.

Protect CFPB

The Dodd Frank Act and the creation of the Consumer Financial Protection Bureau are the most effective and publicly popular responses to the financial crisis.

  • The CFPB has secured over $12 billion in consumer relief, more than all of the other, relevant federal agencies combined.
  • The CFPB developed common sense rules that brought order and transparency to mortgages (Qualified Mortgage and QRM rules, home loan modifications (servicing rules, including successors in interest protections), and the collection of home loan data (HMDA rule).
  • Additionally, CFPB enforcement actions have protected consumers and communities from unlawful lending discrimination and unfair and deceptive practices.
  • Importantly, over 1 million consumers (including over 118,000 Californians) have already taken advantage of the CFPB’s user-friendly consumer complaint database to file complaints -some telling their stories – to seek relief but also to inform other consumers and CFPB enforcement officers about problematic practices and actors.
  • The CFPB’s Director, structure and authority must be vigorously protected.
  • Important CFPB rules on payday lending, prepaid cards, mandatory arbitration, debt collection and small business loan data must be finalized and protected from repeal.
  • We also support the CFPB’s work on issues that have important impacts on consumers, ranging from student loans to credit reporting agencies to financing for cars.

Small Business Lending

  • Small business lending has increased since Dodd Frank Act, not decreased as some Dodd Frank critics have suggested. But small business loans are still less available in LMI neighborhoods and neighborhoods of color
  • And many small business owners looking for credit from banks are relegated to higher cost and variable rate credit cards, not term loans.
  • 95% of the small business loans in CA from JPMorgan Chase Bank are credit card loans. While credit cards serve a purpose, they can come with higher costs, variable rates and are not well suited for the longer term capital needs that many businesses have.
  • Dodd Frank Section 1071 data would bring much needed transparency into who is receiving small business loans- and who is not. In the same way that HMDA data created greater transparency in the home lending market, 1071 small business data will shed light on small business lending trends, highlight disparities, and likely lead to increased lending.
  • Fintech, online, and marketplace lenders can present opportunity, but some are clearly also creating harm. CDFIs and community lenders are spending precious capital and staff time refinancing small business owners out of predatory fintech loans and merchant cash advances.
  • An Opportunity Fund analysis of 150 “alternative loans” found an average APR of 94%, and among Hispanic borrowers, the average monthly payment was more than 400% of take-home pay.
  • Advocates are concerned about a weakening of consumer protection under any OCC national fintech charter which will lead to preemption of state laws, and are concerned that the OCC has not shown itself to be a strong bank regulator (see, Wells Fargo).
  • We join Congressman Cleaver in raising concerns that fintech lenders are violating fair lending laws by not making good credit available to neighborhoods of color, that fintech algorithms may be biased, and that predatory fintech loans are destabilizing small business owned by women and people of color. The CFPB and other agencies must vigorously enforce fair lending laws against predatory and discriminatory fintech lenders. Bank partnerships with fintech lenders must be thoroughly scrutinized to ensure fair lending and consumer protection laws are followed
  • In addition to bank and fintech loans, small businesses are vulnerable to high cost products like Merchant Cash Advance and installment loans that can financially sink business owners instead of helping them.

Homeownership

Home loans are hard to come by in neighborhoods of color. Banks are increasingly focused on making jumbo loans which disproportionately benefit white borrowers, while making fewer loans to Latino and African American borrowers, and abandoning FHA loans in favor of their own, unproven products, with less than impressive results.

  • Any future GSE reform must maintain a duty to serve communities and retain affordable housing goals. Currently, Fannie and Freddie need to be held accountable to meeting ambitious affordable housing goals, and should offer more flexible products to qualified homeowners.
  • We are concerned about a return to redlining, and hope to see DOJ, CFPB and HUD continue their important work in enforcing fair housing and fair lending laws.
  • HUD is currently investigating CRC’s first HUD redlining complaint (more information and graphs below), filed against OneWest Bank for having few branches and making few home loans in neighborhoods of color in six Southern California counties.
  • Given our aging population, increased oversight is needed in the reverse mortgage market to ensure that seniors are not taken advantage of by loan originators and servicers.
  • CRC is deeply concerned that seniors are continuing to lose their homes unnecessarily due to servicer bureaucracy, a lack of strong oversight of this industry by HUD, and a very limited infrastructure to help seniors and their families avoid needless foreclosures.  The elimination of funding for Legal Aid organizations will exacerbate this problem.

Affordable Rental Housing

California continues to suffer from an affordable housing crisis. The California Housing Partnership Corporation estimates that California needs 1.5 million affordable homes to accommodate the state’s lowest income residents.

  • Any HUD budgets cuts to key programs such as HOME, CDBG, Rental Assistance and Low Income Housing Tax Credits, could be devastating.
  • California nonprofit housing developers report that many investors, including banks subject to the Community Reinvestment Act, are pulling back from existing commitments in tax credit deals and attempting to renegotiate terms in light of pending tax reform. The result is fewer units produced and more subsidy coughed up at the 11th hour by desperate nonprofits who then must forego developer fees, and local governments which must contribute additional, unplanned subsidies.
  • Banks should receive CRA rating downgrades for such behavior as well as for seeking community development lending credit for loans that foreseeably lead to displacement of low and moderate income residents the CRA was meant to benefit.
  • CRC is deeply concerned about Fannie Mae’s recent commitment to guarantee up to $1 billion in debt backed by single family rental homes owned by private equity giant Blackstone.
  • Fannie Mae and Freddie Mac must continue to invest in the National Housing Trust Fund and Capital Magnet Fund.
  • Importantly, HUD must continue to implement Affirmatively Furthering Fair Housing obligations and assist local jurisdictions in meeting critical housing needs, fighting displacement and creating access to areas of opportunity for all.

Immigrant Access

The current political environment, with its changing policies and harsh rhetoric is threatening to drive immigrant communities out of the country, or out of sight. A recent CRC survey of confirms that many of our organizational members are seeing clients go underground, fail to show up for jobs, and forego access to needed services because they are concerned about ICE.

  • Bank regulators and banks should work together to clarify and simplify the privacy data rights of immigrants so they will not fear that banks will share their private data with the government.
  • Banks should also be encouraged to lend directly to qualified immigrant homeowners and small business owners who may have ITIN numbers, as well as invest in CDFIs and community lenders that make such loans.
  • For banks serving large immigrant populations, they should consider what information may be helpful to share with their customers about power of attorney and other bank access issues should a household member face deportation.

Payday lending

Payday lending continues to be a scourge on working families, charging 400% APR for short term loans that trap unsuspecting consumers in cycles of debt.

  • The CFPB has designed well considered and reasonable rules to protect consumers against abuses.
  • Federal intervention is needed as payday lenders and lobbyists have a stranglehold in Sacramento.
  • Banks should be incentivized to continue to develop small dollar alternatives to such products and to assist CDFIs and other community lenders that seek to fill this niche, and should also be penalized in their CRA exams for any financing to high-cost, predatory lenders.

Overdraft

According to the CFPB, the majority of overdrafts are on transactions of $24 or less and are repaid within 3 days or less. The CFPB calculated that with a median overdraft fee of $34, this is equivalent to a loan with a 17,000 APR.

  • It is telling that payday lenders defend their triple digit APR loans by saying consumers are merely making informed decisions to take out payday loans because they are less expensive than overdraft fees.
  • Banks continue to overly rely on overdraft fees as a source of fee revenue, to the detriment of their clients. CFPB rules on abusive overdraft policies are important, and all regulators should independently examine the impact of overdraft on bank customers, and work with their banks to end this product.

 

More on CRC’s Redlining Complaint Against CIT Group

Redlining Complaint Against OneWest Bank filed by California Reinvestment Coalition

Mortgage lending in 2015 (CRC)

The complaint alleges that OneWest Bank’s lending to borrowers in communities of color is low in absolute terms, low compared to its peer banks, and is lower than one would expect, given the size of the Asian, African American and Latino populations in Southern California.

Branch locations OWB

As part of the complaint, an analysis of the bank’s assessment areas found that OneWest has only 1 branch in an Asian majority census tract, no branches in African American majority census tracts, and 11 branches in Hispanic majority census tracts.

Branches in Asian, African American, and Hispanic majority trats (OWB)

While OneWest’s foreclosure record is not part of the redlining complaint, analysis by CRC and Urban Strategies Council found that OneWest was nine times as likely to foreclose in communities of color as compared to extending mortgage loans in communities of color.

OWB foreclosures vs originations

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.

2015 Payday Loan Statistics for California

Editor’s note: The Consumer Financial Protection Bureau is finalizing new rules for payday, car title, and high-cost installment loans. They want to hear from YOU about your experiences and recommendations for the loans. Please take two minutes to provide your insights here. 

California Payday Lending Statistics

1) Total Number of loans:  Approximately 12.3 million loans were made in California in 2015 and the aggregate dollar amount of the loans was about $4.2 billion.

2) Average number of loans and average APRs: The average number of loans per customer was 6.5, paying an average APR of 366% (average APR increased 5% from 2014).[1]

3) Repeat borrowers and “churning” of loans: Contrary to loans being advertised as a “one time fix for emergencies” the number of Californians who obtained 10 payday loans (462,334) was far greater than the number who only had one loan (323,870). Subsequent transactions by the same borrower accounted for 76% of the total number of loans made in 2015 with 47% of subsequent loans made the same day a previous loan transaction was paid off and another 23% happening within 1-7 days.

CA DBO new report number of transactions

Graph is from CA Dept. of Business Oversight Report on 2015 Payday Lending Statistics

4) Churning profits: 64% of fees in 2015 ($53.53 million) – came from customers who had seven or more transactions during the year.

Fees collected

Graph is from CA Dept. of Business Oversight Report on 2015 Payday Lending Statistics 

5) Repossessions: 16,989 car title loans resulted in the consumer’s car being repossessed in 2015.[2] At the national level, the CFPB has found that 1 in 5 car title loans ultimately results in a repossession.[3]

6) Fees: California payday loan consumers pay over $507 million annually in payday loans and over $239 million in car title loans.  This ranks California in the #2 spot for highest amount of fees paid for car title and payday loans.[4]

7 Economic drain: Payday lending is an estimated $135 million net drain on California’s economy every year and subtracts 1,975 jobs.[5]

Customers age

Graph is from CA Dept. of Business Oversight Report on 2015 Payday Lending Statistics on ages 

The California Reinvestment Coalition builds an inclusive and fair economy that meets the needs of communities of color and low-income communities by ensuring that banks and other corporations invest and conduct business in our communities in a just and equitable manner.

You might also be interested in these payday lending posts:

Editorials Against Payday Lenders (As of July 2016, there’s been more than 150 editorials written from around the country about the financial harm caused by these lenders).

Payday Lender Hall of Shame This industry is known for spectacularly shady practices against its consumers. We’ve compiled some of the worst.

8 Reasons Not to Get An Online Payday Loan Is that really a lender’s website you’re on?  Or is it a broker who will re-sell your sensitive information repeatedly?

Data Sources:

[1] CA Dept. of Business Oversight press release, available at: http://www.dbo.ca.gov/Press/press_releases/2016/2016%20CDDTL%20Annual%20Report%20and%20Industry%20Survey%20Press%20Release%2007-06-16.pdf

[2] CA Dept. of Business Oversight 2015 CFLL annual report, available at: http://www.dbo.ca.gov/Licensees/Finance_Lenders/pdf/2015_CFLL_Aggregated_Annual_Report_FINAL.pdf

[3] Consumer Financial Protection Bureau press release, available at: http://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-one-five-auto-title-loan-borrowers-have-vehicle-seized-failing-repay-debt/

[4] Center for Responsible Lending report, available at: http://responsiblelending.org/sites/default/files/nodes/files/research-publication/crl_statebystate_fee_drain_may2016_0.pdf

[5] Insight Center for Community Economic Development report, available at: http://ww1.insightcced.org/uploads/assets/Net%20Economic%20Impact%20of%20Payday%20Lending.pdf

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.

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

 

The 10 Most Popular Stories in Consumer Finance in 2014 on CRC’s blog

What were the most popular posts on the CRC blog in 2014?

1) Most popular: City of Los Angeles Lawsuit Against Chase, Wells Fargo, Citigroup, and Bank of America

The City of Los Angeles filed a lawsuit against JPMorgan Chase for targeting minorities for predatory mortgages and the subsequent economic damage when these loans went into default.  The City Attorney, Mike Feuer, has already sued Wells Fargo, Citigroup Inc, and Bank of America for the same issues.  See this Law 360 article on a new lawsuit filed in December 2014:  LA Sues JPMorgan, BofA, Citi Over Discriminatory Lending

2. New Resource for Widowed Homeowners Facing Foreclosure

The “widows and orphans” problem refers to the fact that many widows, orphans, and others who inherit or have an ownership interest in property have faced foreclosure upon the death of a loved one because they were not listed on the loan, and the servicer would not work with them so that they could keep the family home.  See the recent announcement from the CFPB that they will providing additional updates to these rules here: CFPB Proposes Expanded Foreclosure Protections

3. Editorials Against Payday Lenders

How do over 50 newspapers feel about the payday lending industry?  Take a look and learn why advocates are excited about the Consumer Financial Protection Bureau’s upcoming rule-making for an industry who had a number of scandals in 2014.

4. The Payday Lender Hall of Shame

This is the worst of the worst when it comes to payday loan stories- here’s just a small sample, be sure to read the full post, and while you’re at it, sign our petition to CFPB Director Richard Cordray.

  • 1,000 text messages sent to a man after his suicide from debt collectors?
  • $83 million in campaign contributions made by the payday loan industry to prevent strong consumer protections from being enacted into laws
  • Training manuals that tell payday loan staff how to keep customers caught in the debt cycle

5. Banc of California Acquisition of 20 Banco Popular Branches Opposed 

After CRC members and allies opposed this acquisition, Banc of California agreed to create a public, 5 year community benefit and reinvestment plan.

6. Community members gather in Oakland to Celebrate California Reinvestment!

While CRC members and allies are serious about economic justice, they also know how to have fun.

7. Community leaders protest sale of 20 local Banco Popular Branches in Los Angeles

CRC members and allies held a press conference in front of a Banco Popular branch in LA as part of our initial opposition to Banc of California purchasing 20 Banco Popular branches.

8. John Oliver and Sarah Silverman on Payday Loans  

This post is self-explanatory, but if you watch the video, know that this industry is so bad there’s some adult language used by Mr. Oliver and Ms. Silverman.

Our favorite line? 

After a payday lender says “If you can’t pay the loan, don’t worry, we’ll be there to work with you.”

Oliver responds “No S*** you’ll be there, your business model depends on it!

(He’s referring of course to the debt trap that is sprung for the majority of people who take out a payday loan and find themselves unable to repay it two weeks later).

9. Bank Payday Loans No Longer Offered By Wells Fargo or US Bank

CRC was particularly happy to see this announcement after our opposition to banks providing these “direct deposit advance” loans that were very similar to payday loans.  Of course, we’d still like to see the banks get completely out of the business of payday lending, and stop providing financing to these modern day loan sharks.  For more on the financing that main street banks provide to payday lenders, see the report “Connecting the Dots” from our ally, Reinvestment Partners, based in North Carolina.

10. 80 Organizations Call on Federal Government to Address Private Equity and Investor Landlords

Have you heard about Wall Street’s latest profit scheme?  After millions of homeowners lost their homes to foreclosure, private equity is now moving into the housing market, buying roughly $200 billion worth of single-family homes, with the intent of securitizing the rental income…sounds familiar, doesn’t it?  Just look out if you’re a first-time homebuyer (hard to compete with all cash offers), a tenant (you might get booted to make way for higher paying renters), or a community, whose makeup could be changed thanks to the new landlords.

And, our three honorable mentions (we should point out that the OneWest post is only a few weeks old, so it was at a distinct disadvantage!)

A.  Community Leaders Hold Press Conference at OneWest Bank Headquarters 

In December, CRC received a response to our FOIA request to the FDIC, asking how much money the FDIC has paid out and expects to pay out in the future, under controversial shared loss agreements with the bank.  We released the figures (OneWest is on track to receive a whopping $2.4 billion by 2019!) at a press conference with our members and allies in front of the bank’s headquarters, where we called on the Federal Reserve to hold public hearings about this proposed, Too Big To Fail bank merger.  CRC also called on the bank to implement a foreclosure moratorium for surviving spouses whose mortgage is serviced by a OneWest subsidiary, Freedom Financial.  Read Kevin Stein’s HousingWire post to learn about three elderly homeowners who were facing foreclosure by OneWest Bank, and why we’re urging the bank to implement a moratorium until HUD develops rules to address situations where surviving family members are facing foreclosure due to a reverse mortgage.

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

Payday lenders need access to your checking account in order to process the loans.  Learn more about Four Oaks Bank, and how 14 consumers were harmed by the bank playing an enabling role in processing illegal predatory loans.

C. Tenants Rights After a Foreclosure Upheld by California Court of Appeal

The story of a bank becoming the owner of a home after a foreclosure trustee sale is common in California.  Unfortunately, so is the experience of these two tenants who had continued paying their rent and should not have been evicted.  After a trustee sale, some real estate agents will try and get the current tenants out of the property as quickly as possible, offering cash for keys, making illegal threats, or even calling the police.  Tenants may or may not know their rights, and the real estate agents may take advantage of this and try and force them out quickly.