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.

California Advocates Attend National Community Reinvestment Conference in Washington, DC

Representatives from member organizations of the California Reinvestment Coalition traveled to Washington DC last week to attend the National Community Reinvestment Coalition conference.  The theme of the conference was “A Just Economy: Ideas, Action, Impact.”

The conference is a gathering of NCRC’s diverse membership base from around the US, including CDFI’s, fair housing organizations, housing counseling organizations, consumer advocates, credit counselors, small business lenders, community organizing and civil rights groups, and more.

Speakers at the conference included Shaun Donovan, the Secretary of Housing and Urban Development (HUD),Thomas Curry, Comptroller of the Currency, Steven Antonakes from the Consumer Financial Protection Bureau, Martin Gruenberg, Chairman of the Federal Deposit Insurance Corporation, and more.

Shaun Donovan

Secretary Donovan spoke about potential reforms to Fannie Mae and Freddie Mac and recognized the conference participants for their work to help people during the foreclosure crisis and to also help with rebuilding afterwards.  He also spoke about the ongoing crisis of a lack of affordable housing in communities across America and cited NCRC’s work to ensure that reforms to Fannie and Freddie don’t leave low-income communities behind.

Fleeced

Wednesday night included a screening of “Fleeced”, a documentary about elder financial abuse which was a big draw with a packed room. A panel discussion included Kim Jacobs, the producer of the film, Anita Gardner, a consumer in the film who faced an uphill battle with her bank when she sought assistance with her mortgage after health problems, as well as Robert Zdenek, the Director of National Neighbors Silver at NCRC, and Dory Rand, president of the Woodstock Institute. The film was commissioned by NCRC, with support from the Atlantic Philanthropies.  A screening will also be held in Sacramento on April 15th at 5:30pm, as part of the Housing California conference and Annette Smith, a consumer featured in the film will also be one of the panelists who speaks after the screening.

California delegates flew into Washington DC early to meet with our elected officials as well as banking and housing regulators.

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On Thursday, as part of NCRC’s Hill Day, CRC Members headed to Capitol Hill to meet with their senators and representatives.  There were a number of topics to discuss, a few of the topics the California delegation discussed included:

  • Payday lending and the upcoming rule-making by the Consumer Financial Protection Bureau
  • The need for more investment in affordable housing in California, especially since the dissolution of redevelopment agencies that funded affordable housing
  • GSE reforms (and ensuring that low-income communities aren’t left behind)
  • A recent proposal for the USPS to offer financial services through a prepaid card
  • Effects of private equity firms and other investors buying up homes
  • The Permanently Protect Tenants at Foreclosure Act of 2013
  • Extension of the Mortgage Debt Forgiveness Act
  • Transparency around foreclosure reporting (to see if mortgage modifications and other assistance is getting to communities equally- a topic recently addressed in a February 2014 GAO report (read more here)
  • Small business lending (especially to minority business owners- read our December report about this issue here)
  • Future mortgage settlements, and concerns about transparency of who is receiving modifications, and whether modifications are getting to communities hit hardest
  • Bank mergers and the impact on rural California- For more on why this is such a pressing matter, see CRC’s “Down in the Valley” 2013 report, or our recent protest against the proposed acquisition of Sterling Bank by Umpqua Bank.
  • Issues faced by widowed homeowners who are facing foreclosure instead of receiving assistance from their bank or mortgage servicer. See this December 2013 article that explains why improvements, monitoring, and enforcement are still needed: “Bank might foreclose on home because late husband isn’t residing there

After meeting with their senators and representatives, attendees were especially excited by the lunchtime speaker: Senator Elizabeth Warren, (D-MA), an outspoken advocate who was paved the way for improvements in policies and programs affecting the same communities and people that NCRC’s members serve.

On Friday afternoon, CRC’s new Executive Director, Paulina Gonzalez spoke at a session: Winning Public Benefits for Your Community, with other advocates including Ernest Hogan, Executive Director of Pittsburgh Reinvestment Group, and Mitria Wilson, from NCRC.

Friday night closed with a bang!  The Rev. Dr. William Barber II was awarded the Senator William Proxmire award, which recognizes the individual whose life’s work exemplifies the spirit and work of Senator Proxmire’s contributions to economic mobility.  Dr. Barber gave a rousing speech about the need for organizations to work together to stop disinvestment in communities.  Senator Proxmire was the author and lead sponsor of the Community Reinvestment Act.

Kevin Stein, Associate Director at CRC, was also confirmed to the National Community Reinvestment Coalition board of directors.

A big thank you to our CRC members who joined the meetings, including:

It was another excellent conference put on by NCRC- See you next year!