Almost every consumer is concerned with today’s tough financial times. But for those looking to make a fast buck, tough times can also make for easy prey — especially when a payday loan borrower can be tracked down.
Across the country state attorneys general, the Better Business Bureau, law enforcement officials and others are alerting consumers to overly-aggressive phone callers who threaten arrest if a payday loan is not immediately repaid.
Claiming to be representatives of a law firm or collection agency these fake collectors demand personal financial information such as bank account or credit card numbers. Others request that monies be wired immediately or direct consumers to purchase a pre-paid credit card. Regardless of the specific request, their aim is to either get your money directly or gain access to it through information provided.
In truth, however, many of these callers have no affiliation with a credible business, the names are fictitious and calls are made from untraceable numbers. The heavy-handed collection tactics are intended to get cash quickly and move on to the next victim.
According to North Carolina Attorney General Roy Cooper, “Don’t fall for these calls from crooks demanding that you pay phony debts. Never agree to share your personal information with someone you don’t know who calls you, no matter how convincing they sound.”
Rather than reacting to harsh language and pressures to pay immediately, consumers would be wise to assert their own interests. A legitimate debt collector should respond to requests for written and additional information. That kind of inquiry should identify the original creditor, amount owed, date of the alleged transaction, etc. Any pushback from this line of questioning should signal that the caller is suspect.
For bona fide collection businesses, the Fair Debt Collection Practices Act (FDCPA) sets standards for debt collectors and covers personal, family and household debts. Abusive, deceptive or unfair practices are specifically prohibited. This law covers personal, family and household debts — including payday loans, credit cards, auto loans and more.
Phoning consumers before 8 a.m. or after 9 p.m. is illegal. Any collection attempt at a consumer’s workplace is also banned. In either of these circumstances, the consumer is protected so long as they advise the collector of their unwillingness to take such calls.
Each year, the Federal Trade Commission prepares a report on FDCPA. For 2010, the agency received more complaints on debt collection than on any other industry. The three top categories of complaints were:
America’s lingering and widespread unemployment imposes financial challenges. But just because you may have fallen into debt, now is not a time to fall victim to a consumer scam. If debts are owed, speak directly with your creditors to arrange a manageable repayment plan, and develop a paper trail as evidence of your good faith efforts to repay.
Most importantly — let the scammers find someone else to make flinch. — (NNPA)
From SCLC’s 1967 Convention to 2011’s King Dedication …
The storm-delayed ceremonies dedicating a memorial to Dr. Martin Luther King Jr. in the nation’s capital brought both surviving family members and many of the late Dr. King’s contemporaries. Men of the movement such as Rev. Joseph Lowery, Ambassador Andrew Young, Congressman John Lewis, Julian Bond and Reverends Jesse Jackson and Al Sharpton, stood on the national mall with President Barack Obama, Vice-President Joe Biden and several White House cabinet secretaries.
For some, the King Memorial dedication was a much-deserved tribute to a bygone era. Yet it in reality, it was that and more. The principles of freedom, justice and equality that King espoused are eternal — not generational. His life provides a glimpse into both what must be overcome and the fortitude to achieve it. For all that has been accomplished since King’s 1968 assassination, much more work has yet to be pursued.
On August 16, 1967, King delivered one of many prophetic speeches, though this one is seldom cited. The occasion was the 11th annual Southern Christian Leadership Convention. His keynote address asked the gathering, “Where do we go from here?” In part of that speech, King responded to his question with more questions.
“One day we must ask the question,” said King, “Why are there 40 million poor people in America?
Instead of 40 million people in poverty, the figure has now grown to 46 million. For African Americans, one in four people today live in poverty. Unemployment rates for African Americans are double those of the general population. According to the Economic Policy Institute’s analysis of the most recent census data, since 2007, median incomes of Black families dropped 10 percent from $35,665 to $32,068.
Add to these disturbing inequalities, predatory lending with triple-digit interest for payday and car title loans, or dealer-mark-ups on auto financing, and disproportionate foreclosed homes, there is a measurable tax for being Black or Latino in America.
But like our martyred Martin, we must collectively find the will and way to transform unfair burdens into promising opportunities.
“Where do we go from here?” King repeated. “First we must massively assert our dignity and worth. We must stand up amid a system that still oppresses us and develop an unassailable and majestic sense of values.”
The permanent memorial to King’s incredible life and legacy can also challenge us to make real the work he envisioned but did not live to see:
“I conclude by saying today that we have a task, and let us go out with a divine dissatisfaction.
“Let us be dissatisfied until America will no longer have a high blood pressure of creeds and an anemia of deeds.
“Let us be dissatisfied until the tragic walls that separate the outer city of wealth and comfort from the inner city of poverty and despair shall be crushed by the battering rams of the forces of justice.
“Let us be dissatisfied until those who live on the outskirts of hope are brought into the metropolis of daily security.
“Let us be dissatisfied until slums are cast into the junk heaps of history, and every family will live in a decent, sanitary home.”
In 2011, the fight for equality goes on. — (NNPA)
The Federal Trade Commission (FTC) convened a series of forums last year that explored abusive auto lending practices. The Center for Responsible Lending (CRL), a participant in those roundtables, has issued a new research report on deceitful practices that take advantage of unsuspecting customers.
The report, Deal or No Deal: How Yo-Yo Scams Rig the Game against Car Buyers, shows that consumers with low-incomes and poor credit scores are the most likely target for these abuses. By preying upon consumers who are the least able to walk away from deals, the opportunity emerges to make more expensive loans and take consumers’ trade-in and/or down payment.
This is the first national insight into the prevalence of yo-yo scams. This deceitful dealer practice begins when car dealers encourage would-be buyers to leave with a car before finance terms are finalized. With only a conditional sales agreement in place, consumers are encouraged to accept spot delivery, taking the vehicle home. The unsuspecting consumer leaves with the car, trusting the dealer will finalize the terms discussed.
For car dealers, spot delivery reduces the likelihood of the consumer shopping elsewhere for a better deal. Yet for consumers, this practice often leads to problems never anticipated.
“Yo-yo scams occur when a dealer leads a car buyer to believe financing is final,” says Center for Responsible Lending senior researcher Delvin Davis, author of the report. “The dealer lures the consumer back to the dealership, claims the financing fell through, and then pressures the consumer to agree to a new loan at a higher interest rate.”
CRL’s study found that consumers who returned to these dealerships, were often pressured to sign finance contracts with worse terms than those originally mentioned. The report also showed that consumers trying to walk away from the now-worse deal often faced threats of legal action, criminal charges of auto theft, loss of down payment or fees for mileage and wear and tear.
Unfortunately for low-wage consumers with few available choices for financing, many still take the bad deal. When CRL examined the demographics of consumers experiencing yo-yo scams, once again communities of color were disproportionately harmed. After accounting for poor credit and low-incomes, Latino and African-American consumers were prey to yo-yo scams more than white Americans and consumers ages 25 years old or younger.
According to CRL, the majority of consumers wind up with a second finance contract with a higher interest rate. Deal or No Deal is CRL’s follow-up to an earlier report that found yo-yo scam victims on average received an interest rate that was five percentage points higher than what someone with the same risk level would normally pay.
Until laws or regulation change the ways auto financing operates, it might be better for consumers to adjust how they actually shop for a new or used car. Just as consumers now shop for the best mortgage rate available, making a comparable comparison of available auto financing terms would remove third-party transactions that now benefit dealers instead of consumers.
Beginning with a sober and objective figure for what is affordable will empower consumers.
Secondly, if financing is settled before the search for a vehicle begins, consumers can give themselves negotiating power by offering dealers a cash transaction.
In other words, consumers can choose to seize their purchasing power, rather than forfeit it to car dealers. — (NNPA)
For the second time this year, the Consumer Financial Protection Bureau (CFPB) has taken strong enforcement steps against deceptive marketing practices. Through CFPB’s joint enforcement action with the Federal Deposit Insurance Corporation (FDIC), more than 3.5 million consumers with Discover Card accounts will receive approximately $200 million.
Restitution will be awarded to all consumers who were charged for one or more add-on products between December 1, 2007 and August 31, 2011. Over that period, payment protection was marketed as a product that allows consumers to put their payments on hold for up to two years in the event of unemployment, hospitalization, or other qualifying life events.
Discover also sold its Credit Score Tracker, designed to allow a customer unlimited access to his or her credit reports and credit score. The third product was Identity Theft Protection, which was marketed as providing daily credit monitoring. Lastly, Discover’s Wallet Protection product was sold as a service to help a consumer cancel credit cards in the event that his or her wallet is stolen.
Commenting on the actions, Richard Cordray, CFPB Director, said, “This is the second action that the Bureau has taken, in coordination with a fellow regulator, to address the deceptive marketing of credit card add-on products. We have also published a compliance bulletin to put other institutions more specifically on notice that such tactics are illegal and should be halted. We continue to expect that more such actions will follow. In the meantime, we are signaling as clearly as we can that other financial institutions should review their marketing practices to ensure that they are not deceiving or misleading consumers into purchasing financial products or services.”
A joint investigation by the two federal offices found that Discover used deceptive telemarketing tactics to sell all of these products. Using scripts with misleading language matched by fast-talking telemarketers, federal regulators found that consumers were:
Enrolled without their consent;
Misled about the fact that there was a charge for the products;
Misled as to when charges for the add-on services would be applied; and
Were unaware of eligibility limitations for certain benefits, including employment or pre-existing medical conditions.
No affected consumer needs to take any action to receive what is owed. Consumers with a current Discover card will receive a credit to his/her account. Consumers with closed Discover accounts will either receive a check by mail, or the restitution will be applied to any remaining balance on the card.
Beyond these refunds, additional enforcement actions require Discover to stop deceptive marketing, submit a compliance plan to both CFPB and FDIC for approval and submit to an independent audit.
As with CFPB’s similar enforcement action against Capital One, penalty fees will also be applied. Discover will split a $14 million penalty between the U.S. Treasury Department and the CFPB’s Civil Penalty Fund.
Earlier this year, CFPB’s first enforcement action against Capital One found similar deceptive tactics in selling credit card add-on services. As a result, Capital One agreed to refund $140 million to 2 million Capital One customers. An additional $25 million penalty was also assessed.
These two enforcement actions combined represent $340 million in consumer restitution and $39 million in penalties.
With this volume of refunds, consumers would also be well-advised to be on the lookout for scammers claiming they will provide a refund. Further CFPB urges consumers to advise the Bureau of those who try to charge for a refund, ask that funds be sent to a third party, or solicit personal information to receive funds due. Suspected scams should be reported to CFPB’s toll-free number, 855-411-CFPB.
Actions still needed on bank payday, overdraft fees and more
Dissatisfaction with banking practices and policies have irritated, alienated and obligated customers in ways that did not seem fair at all. Although complaints ranged from mortgage lending and servicing to credit cards, the proverbial straw that broke was a new fee for use of debit cards.
In a series of late September announcements, many major banks advised customers of new fees. While some banks preferred monthly fees ranged from $3 to $5, others would test or “assess” fees per purchase.
In the throes of a lingering recessionary economy, high unemployment, growing poverty, and not enough jobs for millions of Americans to be financially self-sufficient, consumers revolted with a coordinated national effort called “Bank Transfer Day.” November 5 was the designated day for consumers across the country to leave their banks and join local credit unions.
Yet many consumers chose to act right away. Before “Bank Transfer Day”, the Washington Post recently reported that over the past month, the National Association of Federal Credit Unions recorded a 350 percent increase in Web traffic to its online credit union locator. The portal, www.CULookup.com matches visitors with institutions they might be eligible to join based on affiliations, such as school, employer or church.
According to Bill Cheney, CEO of the Credit Union National Association (CUNA), “If all of the people signed up to participate in “Bank Transfer Day” on Saturday do so, and remain credit union members over the year that follows, those consumers will save a combined $4.8 million. Combine that with the $5 per month that they WON’T be paying in debit card fees, and you’re up to $5.1 million.”
With consumers everywhere needing to contain costs and stretch dollars further, it would be wonderful if November 5 marked the beginning rather than an end to consumers acting in concert to change bank practices. Consumers clearly understood the new debit card fee; far less clarity surrounds overdraft fees, a nagging consumer nemesis. All too often, consumers do not know of these mounting charges until they receive a bank statement. According to research by the Center for Responsible Lending, bank overdraft fees cost customers $24 billion each year.
Although the Dodd-Frank Consumer Protection Act guarantees that banks can only assess these fees once a customer opts in, there is still something inherently unfair about an average $35 fee per debit card transaction instead of just declining a purchase and avoiding the fee. CRL research also found overwhelming consumer support for the fee-free denial.
Then there is the emergence of bank payday lending. This no-lose proposition for banks deducts the full amount of an advance deposit loan — plus fees from a customer’s next deposit. The result for the customer is the same turnstile of debt wrought from storefront payday lenders. Each year, the cycle of debt caused by payday loans — regardless of the lender — costs 12 million consumers $1.4 billion in fees alone.
Whatever results from Bank Transfer Day, one thing is as commendable as it is memorable: Consumers have moved from anger to direct actions in their own defense. The collective power of millions of nameless, faceless consumers was claimed.
Here’s hoping that power will be preserved and wielded to enact more progressive change. — (NNPA)
In the aftermath of the successful effort to better protect consumer finances, the Consumer Financial Protection Bureau (CFPB) is now facing a forceful effort to undermine its mission and operation. Even before CFPB reaches its first anniversary of operation, proposed federal legislation that would exempt a variety of non-bank lenders has attracted 19 co-sponsors representing portions of Arizona, California, Georgia, Illinois, Maryland, Mississippi, Missouri, New Mexico, New York, North Carolina, Ohio, Texas and Wisconsin.
House Bill 1909, sponsored by California Rep. Joe Baca, R-Calif., seeks to create a new federal charter for non-bank financial service providers that would bypass CFPB. It would also preempt state consumer protection laws and rollback consumer gains nationwide. Several states have already passed strong consumer protections against the very same lenders this federal legislation would reverse. If enacted, non-bank lenders would no longer be subject to the federal Truth in Lending Act, which requires disclosure of the cost of credit as an annual percentage rate (APR).
The beneficiaries of this legislation would be a wide range of businesses that offer reloadable prepaid debit cards, payday and car title loans, rent-to-own agreements, pawn shops, check cashing services and more.
On the losing side would be 30 million consumers who either have no bank account — the unbanked — or those who use very limited bank services — the under-banked. Further, if enacted, a two-tiered financial system would be created and the almost certain exploitation of consumers using these products.
According to the Federal Deposit Insurance Corporation (FDIC), Black consumers represent more than 30 percent of under-banked households and more than 20 percent of unbanked. Black consumers, together with Hispanic, American Indian/Alaskan and consumers, represent 56 percent of all unbanked households.
Businesses that provide goods or services at a competitive and fair price earn a loyal customer base; they offer consumers for value for their hard-earned dollars. Yet many non-bank financial services included in HB 1909 have never fit that description.
Instead, their “repeat business” results from high fees that entrap customers into long-term debt. The irony is that these same “services” were marketed as short-term transactions. Any financial product that leaves a consumer worse off financially than before can hardly be termed a service.
Fortunately, a number of consumer advocates are actively working to oppose the renewed de-regulation efforts, including Americans for Financial Reform and U.S. PIRG.
In announcing its opposition to HR 1909, the Washington, D.C.-based Consumer Federation of America, was as clear as it was direct. “We oppose any steps intended to remove non-bank lenders from the oversight of the Consumer Financial Protection Bureau.”
In a recent letter to Capitol Hill lawmakers the Center for Responsible Lending noted, “This shift exposes consumers and the financial services marketplace to the very dangers that contributed to the economic crisis. The CFPB was created for the sole purpose of protecting consumers through oversight, rulemaking and enforcement of the rules for the very consumer financial products marketed and sold by the companies covered in this legislation.”
It added, “Less than six months after the Consumer Financial Protection Bureau has been fully operational with a director in place, H.R. 1909 or similar legislation would backtrack on Congress’ promise to consumers. These bills offer nothing new or beneficial for consumers — and removing consumer finance companies from CFPB oversight will set a precedent for many other companies to also seek to be excluded.” — (NNPA)
As we hit the second anniversary (July 21) of President Obama signing into law sweeping financial reforms, more commonly referred to as Dodd-Frank, more than 45,000 people have filed complaints with the newly-created Consumer Financial Protection Bureau.
In one case, a 77-year-old Army veteran and retired businessman living in Georgia was certain he had paid off his mortgage, but his mortgage servicer insisted he still owed money. To make matters even more complicated, the man was blind and had trouble finding paperwork that proved he owned his home free and clear. After CFPB got involved in late 2011, the bank agreed that the mortgage was fully repaid in 2007. For his trouble and his time, the bank sent the borrower a check for $30,000.
In another complaint, CFPB helped a 31-year-old waiter from Florida reduce his monthly student loan repayments to an affordable amount. A young man’s dream of becoming an artist led to a decision to enroll in a for-profit college, where he sunk into debt at the tune of $110,000 while earning an associate’s degree. Without a four-year degree, he was unable to find work in his chosen field as he began paying $700 a month to a private student loan lender.
By the time his federal student loan payments were added, he could barely manage to make ends meet after paying $1,100 in total loan costs. When the private loan company refused to adjust payments, the young man contacted CFPB. They determined that he was eligible for a reduced payment program that cut his monthly payment to only $407 for a year. Further, he is still working out a plan to reduce federal loan payments.
The best news is that there are even more successful stories of how consumers working with the CFPB were better able to manage financial debt. From July 21, 2011, through June 1, 2012, 45,630 consumers contacted the CFPB with a range of complaints. Mortgage issues ranked highest (19,250 complaints), followed by credit cards (16,840), bank products and services (6,490) and private student loans (1,270).
Of these complaints, 81 percent have led to contacting identified companies for review and response. Others were referred to other regulatory agencies, found to be incomplete, or are still pending with CFPB. Companies contacted by CFPB are also responding — responses have been received on approximately 33,000 complaints.
To make filing complaints easier for consumers, CFPB accepts complaints via its website, by telephone, mail, email and fax. Consumers opting to phone use a toll-free, U.S.-based call center that offers assistance in 187 languages, and can accommodate the needs of both hearing and speech-impaired callers.
With information in hand, CFPB then determines if the complaint falls within the bureau’s enforcement authority. Once that basic threshold is met, affected companies are contacted for review and reply. While the complaint is in progress, consumers can log onto a secure portal or call the toll-free number to receive status updates, provide additional information and review responses submitted by companies.
In addition to the consumer complaints received, CFPB has also gained further consumer insights through written comments on a range of topics that include but are not limited to: debt collection, equal credit, leasing, overdraft and payday lending.
For example, in response to a larger than expected attendance at a January 2012 payday lending public hearing in Birmingham, CFPB offered a comment period for persons and organizations either unable to attend or speak. By the time the comment period closed on April 23, a total of 620 comments were filed. The majority of comments received spoke directly to consumer needs and concerns, some citing CRL research.
Speaking on behalf of the Leadership Conference on Civil and Human Rights, Wade Henderson and Nancy Zirkin wrote in part, “Regardless of the precise source of payday loans, their effects are the same. They come with triple digit interest rates. Communities and consumers are targeted, rather than served. And according to the Center for Responsible Lending, each year more than $4.2 billion of otherwise valued and disposable income are lost to the accompanying predatory fees.”
(If you or someone you know is interesting in offering comments or making an online complaint, visit the CFPB at: http://www.consumerfinance.gov/. Consumer calls are accepted from 8 a.m. – 8 p.m. (Eastern Time) Mondays through Fridays at (855) 411-2372.
When this year’s student debt burden surpassed the $1 trillion mark, it became even larger than the amount of debt held on credit cards. New findings now conclude that heavy student loan debt delays the ability of young graduates to buy a home and in the worst scenarios, strips Social Security benefits and even disability income paid under Supplemental Security Income.
“There has been a 46 percent increase in average debt held at graduation from 2000 to 2010. Moreover, total outstanding debt held by the public has skyrocketed 511 percent over the past decade,” according to “Denied: The Impact of Student Debt on the Ability to Buy a House,” a new research paper by the Young Invincibles, a national youth advocacy group.
Their research shows that the challenges of becoming a homeowner are magnified with student debt. Student loan debt has been rising much more rapidly than salaries for college graduates. When researchers compared salaries of the typical single student loan borrower to the cost of a median-priced house, they concluded that potential borrowers with a student loan and average consumer debt are not likely to qualify for a mortgage. If a married couple carries a double burden of student debt, it becomes even harder to qualify.
Although student loans are usually considered to be a problem for young people, the reality is that many seniors share the same debt dilemma. The Treasury Department reported earlier this year that people ages 60 and older owed $2.2 million on student loans that were 90 days or more past due. As a result, Treasury reduced benefit payments on Social Security checks for 115,000 retirees. Legally, the share of benefits withheld can be as high as 15 percent.
In 2005, the United States Supreme Court upheld two federal laws that enable the government to take money from federal benefits to make student loan payments. The Higher Education Technical Amendments Act allows the federal government to collect funds without statutory limitations from defaulters. A second and related act, the Debt Collection Improvement Act, authorizes reductions in Social Security payments for past due student loan borrowers. The only exemption to this second law is on monthly benefits of $750 or less.
Consumers who owe $60,000 or more on federal student loans are allowed by Treasury to take as long as 30 years to repay the loan. An additional eight years of repayment is allowed in the event of economic hardship or long-term unemployment. In these instances, payments are deferred while the interest continues to accrue.
Who would ever have imagined that a student loan repayment would take 30 years or more? In bygone years the only loans that incurred such lengthy indebtedness were mortgages.
Consumers with blemished credit scores or those with limited funds for a down payment may seek an Fair Housing Administration (FHA) or Veterans Affairs (VA) financing with down payments as low as 3.5 percent. However these loans can be expensive and typically take a longer time to be approved. Since October 2010 three separate price increases on FHA loans have occurred. The most recent was the addition of an upfront mortgage premium payment announced in April that will add $1,500 in upfront costs for a typical home of $200,000.
The domino effect of debt begins with a student loan and then delays the ability to qualify for a mortgage. With other consumer debt payments such as car loans, and credit cards taking a larger share of net income, the ability to gain wealth is limited if not stymied.
Consumers opting for rental housing may find the monthly payment more affordable on a cash-flow basis; but no equity or wealth is derived on rentals. Further, as the rental housing market has tightened, the cost of rental housing continues to increase, leaving fewer disposable dollars to save for a home down payment.
And if parents or grandparents signed for a student loan, the benefits they worked for most of their lives are siphoned and tarnish what ought to be the proverbial ‘golden years.’
The “Denied” report reaches a thoughtful conclusion: “Policymakers who may be unmotivated by individual struggles of borrowers, or unconvinced of the extent of the problem today, would be wise to begin to view student debt in an additional light: as an encumbrance on the recovery of the housing market, and as a result, a potential hindrance to economic growth.” — (NNPA)
New data from the U.S. Census Bureau announced that 46 million Americans now live in poverty; it is the largest number in the 52 years for which poverty estimates have been published. Since 2007, poverty has increased in 46 states and today affects one of every four American children.
As it grips more and younger Americans, there is also evidence that poverty is speaking with a southern accent. The South is now home to 1.5 million of the 2.6 million people who became poor from 2009 to 2010.
In the meantime, the states of Alabama, Louisiana, Mississippi, South Carolina and Tennessee all have a higher per capita concentration of payday loan shops than elsewhere in the U.S. Moreover, in these same states where unemployment hovers at 10 percent or higher, triple-digit interest payday loan rates run as high as 574 percent. Missouri is the only state outside of the South with over five payday stores per 10,000 households.
Anyone living from pay check to pay check or in the worst of circumstances — just trying to get by from one day to another — is vulnerable to a product that seems to offer them a way to get groceries on the table or keep the electricity on. But after that first loan, the payday lending debt trap makes getting those needs met even harder.
With a profusion of local payday stores strategically located in low-income neighborhoods, the payday loan business model depends on borrowers who are unable to both repay the lender and have enough money to make it to the next payday. The trap of recycled debt is also how billions are taken each year from poor people.
Earlier this year, “Payday Loans, Inc.,” a research report by the Center for Responsible Lending found that payday loan borrowers are indebted for more than half of the year on average, even though each individual payday loan typically must be repaid within two weeks. Among these borrowers, a significant share (44 percent), even after paying their loan back several times, ultimately default. The default results in already financially stretched families owing even more fees to the payday lender and their bank.
Fortunately, in 17 other states and the District of Columbia, laws have been enacted to cap these high-cost loans with double-digit interest. In three of these states (Arizona, Montana and Ohio), voters brought about the change through referendums that state officials either could not or would not do legislatively.
Now some cities are choosing to either rein in payday lending by enacting local ordinances or offer alternative small dollar loan programs.
For example, when the Texas Legislature failed to enact meaningful payday reform, the Dallas City Council unanimously passed an ordinance this June that changed both loan terms and the amount of loans.
City Council member Jerry Allen, sponsor of the ordinance told the Dallas Morning News, “They [Texas Legislature], chose to take a very limited action, and we chose to do the most we can at our city level. This is as strong a set of teeth that we can put into this, and it sends a message that we will not tolerate our citizens being taken advantage of.”
As a result, the city of Dallas imposes payday loan limits and restrictions on store locations will also limit how many payday stores can be located near residences and highways.
Fair Community Credit, a new nonprofit corporation in Kansas City, is working with a local bank, service organizations and a church to offer low-income borrowers access to loans at interest rates no higher than 36 percent. To assure that funds are utilized as intended, credit and income requirements are used to screen loan applications.
And in the Big Apple, a new program called “Borrow and Save” is teaching low-income borrowers that they, too, can save money and lessen the financial need for loans.
“It’s a common misconception that low-income people can’t save, and through this product we hope to offer a much-needed product that also incentivizes positive behavior and shows our members that they can save," said Audia Williams, CEO at Union Settlement FCU at the news conference where the program was announced. Other partners include credit unions operating in East Harlem and in the South Bronx — both affiliates of the National Federation of Community Development Credit Unions.
These local initiatives remind me of an adage as old as it is true: “Where there’s a will, there’s a way.” — (NNPA)
Federal regulators and lenders convened Nov. 6–9 in Baltimore to review and analyze whether the goals of the nation’s Community Reinvestment Act (CRA) and fair lending laws are being observed. The annual event, now in its 15th year, attracted sell-out attendance to hear a series of expert presenters’ insights and analyses.
For Assistant Attorney General Thomas E. Perez, the annual colloquium became the occasion for a keynote address that reminded the audience that for communities of color, fair lending remains elusive. “Regrettably, we have found,” said Perez, “that all too often borrowers are judged by the color of their skin rather than the content of their creditworthiness.”
As head of the Department of Justice’s Civil Rights Division since October 2009, Perez noted that more than half of the 2010 referrals received from other federal lending regulators involved discrimination on race or national origin.
Through the creation of a dedicated Fair Lending Unit at DOJ, over $30 million in direct compensation for individuals whose rights were violated has been secured. Also in 2010, the unit reached settlements or filed complaints in 10 pattern or practice lending cases. Of these ten cases, nine have been settled since last year.
Much of this enforcement, according to Perez, is accomplished in collaboration with the President’s Financial Fraud Enforcement Task Force. With representatives from DOJ and other federal agencies, as well as state attorneys general and local law enforcement, the task force investigates and prosecutes a wide range of financial crimes.
“Without a credible enforcement program,” said Perez, “we can never achieve full compliance with the law or fully level the playing field between responsible lending institutions and unscrupulous lenders.”
In 2011, a record number of cases have been filed under the Equal Credit Opportunity Act. Currently, there are seven authorized lawsuits and more than 20 active investigations involving redlining claims, pricing discrimination, and product steering based on race or national origin.
In an effort to address the devastation of neighborhoods and home values, the Civil Rights Division is including innovative provisions to address the full scope of damage done, in addition to settlement terms stipulating more traditional remedies such as a marketing campaigns or establishing a physical presence in under-served communities.
For example, in a St. Louis settlement with Midwest Bank, the decree calls for assistance to help residents repair their credit and provide access to low-cost checking accounts. Similarly, in the metropolitan Detroit decree with Citizens Bank, the lender must provide home improvement grants to current homeowners living in neighborhoods hard-hit by foreclosures. Both Citizens and Midwest agreed to find solutions that would allow them to remedy the harm done while also reaching new customers.
In cases where African-American and Latino borrowers were charged more than similarly qualified white borrowers, the Civil Rights Division examined loan origination practices, guidelines on how fees or interest rates were set, and whether there was any documentation to explain differences in prices.
Summarizing goals for both current and future efforts, Perez called for transparent transactions, prompt decisions, fair lending, and open communication with all borrowers.
“It is the stubborn persistence of race as a factor in the pricing of loans” concluded Perez, “even after you account for relevant creditworthiness factors that we seek to address through our enforcement actions. The disparity grows as you move up the credit score ladder. All too frequently, equal credit opportunity remains elusive for minorities, even upper-income minorities who are creditworthy.” — (NNPA)