December 20, 2022 — Article

Advocates worked on multiple fronts to protect low-income consumers and fight for racial justice and equity 

In courts, legislatures, and agencies, advocates at the National Consumer Law Center (NCLC)  made strides in 2022 to preserve homeownership and access to utilities; combat damaging credit reports, wage garnishment, and predatory loans; reduce medical debt and student loan burdens and their consequences; protect consumers from scam robocalls and risky fintech credit projects; and help low-income people who are disproportionately burdened by excessive criminal fees and fines. Our policy experts delivered testimony and comments, wrote model laws, engaged with members of the media, and armed consumer law attorneys in government, legal aid, and the private sector with persuasive advocacy tools. 

Here are some highlights of NCLC’s significant advocacy and progress in 2022 on behalf of low-income and vulnerable consumers: 

Access to Justice/Arbitration

NCLC called on Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra to exercise the Bureau’s authority to limit forced arbitration clauses commonly buried in the fine print of consumer financial contracts. Advocates cheered passage of the Forced Arbitration Injustice Repeal (FAIR) Act of 2022 in the U.S. House, a sign that the bill is gaining traction in Congress. It would restore access to the courts for consumers, servicemembers, workers, and small business owners harmed when they shop at, bank with, borrow from, work for, or do other business with companies that violate the law.

Bankruptcy

After advocating for years that student borrowers should be able to more easily discharge their debts in bankruptcy, NCLC praised the Departments of Justice and Education for new guidance on when a student loan borrower who has filed bankruptcy may be relieved of a federal student loan debt.

Cars

Transportation expenses are a significant household expense for most families, and NCLC campaigned to make electric vehicles available to lower income households so they can save money and decrease reliance on fossil fuels. Advocates outlined a range of policies and incentives to ensure that EVs can be within reach for families with low and moderate incomes. 

Enforcement actions by federal and state consumer protection agencies, as well as private litigation, continue to highlight auto dealer practices that exploit the inherent power imbalance in vehicle sales, effectively driving up the cost of many vehicles. We worked with coalition partners to submit significant comments to the FTC urging the agency to address unfair and deceptive practices, including misleading advertising that conceals the vehicle price, deceptive inclusion of add-on products or services at inflated prices, and yo-yo sales transactions in which dealers trick consumers into financing agreements with more expensive terms. 

Credit Reports

Years of advocacy to counteract the damaging effects of credit reporting showed significant progress this year, with credit bureaus committing to eliminate up to 70% of medical debt from credit reports. 

Medical debt disproportionately burdens Black families, and NCLC continues to advocate for the removal of all medical debt from credit reports and to urge the CFPB to go further to protect consumers with medical debts. An NCLC advocate testified before the U.S. Senate, underscoring the economic impact of the growing burden of medical debt, and urging the legislature to work on ways to prevent medical debt in the first place and to protect people from harmful debt collection and credit reporting practices.

After long advocating for new credit scoring models from the Federal Housing Finance Agency (FHFA), NCLC applauded the validation and approval of two updated scoring models that do not consider paid debt collection items and that reduce the impact of unpaid medical debt – greatly lessening the harmful effects of these items on consumers’ creditworthiness, as calculated for Fannie and Freddie-backed mortgages. NCLC has been advocating since 2014 for the adoption of new scoring models, and this development will significantly expand access to sustainable homeownership opportunities. 

Criminal and Consumer Justice

In a compelling report, NCLC advocates demonstrated the extent to which court debt is a barrier to record clearing that prevents poor and low-income people from getting a job or a place to live and from participating in their community or civic affairs. The High Cost of a Fresh Start: A State-by-State Analysis of Court Debt as a Bar to Record Clearing found that, in almost every jurisdiction, outstanding court debt is a barrier to record clearing.

Advocates also demonstrated how incarcerated federal student loan borrowers are systematically denied access to student loan relief and recommended policies and practices to remove these extraordinary barriers. 

Debt Collection 

NCLC led a successful effort to persuade the California legislature and governor to protect workers by passing a new law that will completely protect a worker who earns $20 per hour from wage seizure for old debt and will reduce the amount that can be seized from workers who earn more.  

NCLC is also supporting federal legislation to protect consumers wages, lifting up Rep. Alma Adams’ (D-NC) introduction of the Protecting Wages of Essential Workers Act of 2022. 

Advocates produced an analysis of Regulation F debt collection regulations six months after their implementation and offered key policy recommendations the CFPB should implement to enforce and improve Regulation F.

Energy, Telecom, and Robocalls

Along with the National Resources Defense Council, NCLC created the Water Affordability Advocacy Toolkit, a menu of state- and local-level policy solutions that directly address household-level affordability for people served by centralized drinking water or wastewater systems. The toolkit is aimed at protecting lower-income households and households of color, which are most likely to suffer serious consequences if they lose access to essential water services, including spiraling debt and economic hardship, loss of housing, loss of parental custody of children, and grave risks to both individual and community health. 

NCLC continued meeting and filing comments with the Federal Communications Commission (FCC) urging meaningful changes to rules governing telecom providers that transmit illegal robocalls and texts. In June, NCLC and the Electronic Privacy Information Center (EPIC) published a report finding that tens of millions of daily scam robocalls designed to steal money from unsuspecting consumers translate into revenue for telephone providers. The report outlines strategies to reduce the fraudulent calls. 

On the subject of ringless voicemail, the FCC issued a declaratory ruling, noting that it agreed with NCLC and making it “crystal clear” that ringless voicemail is subject to the Telephone Consumer Protection Act (TCPA).

In Maryland, NCLC helped shape new regulations to protect low-income energy consumers from deceptive and overpriced energy supply contracts.

In Illinois, the Illinois Commerce Commission approved a new metric proposed by NCLC that has the potential to reduce electricity disconnections in some of the most economically disadvantaged Illinois communities by 34% or more between 2024-2027. The new metric for Illinois’ two major electric utilities will financially reward or penalize the companies based on a requirement that the utility reduce disconnections by 10% annually in the 20 zip codes with the highest disconnection rates within their respective service territories. 

Equity and Racial Justice

A focus on equity and racial justice is embedded in all aspects of NCLC’s advocacy. NCLC advocates urged the Biden-Harris administration to take key steps to combat systemic racism in credit, housing, and financial services.   NCLC’s roadmap for equitable economic recovery in 2022 contains a slate of policy proposals to build wealth and economic opportunity for consumers of color.  

Among the many proposals are suggestions to reduce the racial wealth and homeownership gaps. The gap between the Black and white homeownership rates in the United States is at its highest level in 50 years. Advocates held a series of high-level meetings with influential policy makers to emphasize practices and policies that can reduce the racial wealth and homeownership gaps for consumers of color. This complemented the ongoing push to reform the appraisal process, promote the use of Special Purpose Credit Programs and to preserve existing supplies of affordable housing by opening up financing channels for lower dollar mortgages.  NCLC will leverage the recent promising uptick of the Black homeownership rate to continue to push for substantial reform and equitable access to homeownership opportunities for all consumers.   

With the Center for Law and Social Policy (CLASP), NCLC published a report exposing the disproportionate impact student debt has on Black borrowers. Arguing that without broadbased cancellation and reforms to the student loan and federal student aid systems, the U.S. higher education system will continue to hinder, rather than support, Black Americans’ economic mobility, the report outlines steps to address the dual student loan and college affordability crisis through federal policies and executive action.

FinTech Credit Products

With the growing popularity of Buy Now, Pay Later (BNPL) lending, NCLC joined more than 75 allied organizations in comments to the CFPB recommending it view BNPL products as credit cards covered by the Truth in Lending Act (TILA), enact a larger participant rule to supervise this market, and look out for practices that harm consumers. NCLC advocates also participated in a number of roundtable discussions with U.S. and international regulators and academics on the consumer impact of BNPL.

In coalition comments, NCLC urged the CFPB to address junk fees, including so-called “tips” and inflated “instant access” fees used to disguise interest on banking app cash advance products and earned wage advances.  

Housing

NCLC has worked to stem troubling foreclosure trends that threaten sustainable homeownership, especially in Black and Latino communities, by ensuring that Homeowner Assistance Fund (HAF) programs are more accessible and obtaining a whole-government foreclosure for federally backed mortgage borrowers who have applied for HAF assistance. We also worked to improve loss mitigation rules for federally backed mortgages, pushing for changes to enable greater payment relief for FHA homeowners in particular. We obtained a new repayment plan option for reverse mortgage borrowers impacted by the pandemic.  Most recently, we made comprehensive recommendations to the CFPB on how to update hardship assistance procedures for mortgage borrowers based on the lessons from COVID programs.

We’ve made strides on language access issues: applications for mortgages eligible for purchase by Fannie Mae and Freddie Mac (which set policies that influence the whole market) must, as of March, ask about the borrower’s language preference. Advocates continue to push for reforms to help borrowers with limited English proficiency, including requiring servicers to ask about language preference for existing borrowers now.

Seeing a growing risk for borrowers who still owe debt from second mortgages with predatory terms taken out more than a decade ago, NCLC created a playbook for homeowners to avoid “zombie second mortgages” that have been reawakening  and threatening home equity.  We have also urged the CFPB to act on these abuses.

To protect renters, NCLC advocates continue to work on the state and federal levels to reduce the reporting of rental debt on credit reports, ban the use of credit scores from tenant screening, and prohibit the use of eviction records in cases that didn’t result in a judgment from being used for tenant screening.  NCLC also was part of a team filing a lawsuit against SafeRent Solutions, alleging that the national tenant screening provider has been violating the Fair Housing Act for years by giving lower scores to Black and Latino/Hispanic rental applicants who use federally funded housing vouchers to pay the vast majority of their rent, causing them to be denied housing. 

High-Cost Loans

Caps on interest rates and loan fees are the primary vehicle by which states protect consumers from predatory lending. NCLC’s annual report, Payday Installment Lending in the States, found progress in some states and setbacks in others, with 34 states and the District of Columbia now capping the APR on a $2,000, two-year installment loan at 36% or less. 

But in some states, “rent-a-bank” schemes are being used to evade rate caps. NCLC, together with coalition partners, urged the FDIC to crack down on banks that facilitate predatory lending, issued a report about predatory puppy loans for purchases at pet stores, often for puppies sourced from inhumane puppy mills, and called on major auto repair chains to stop offering rent-a-bank loans.  

NCLC also cheered DC’s $4 million settlement that chased out predatory lender Elevate, and California’s suit against OppFi. NCLC maintains a High-Cost Rent-a-Bank Watch List highlighting banks and lenders that team up to issue triple-digit interest, debt-trap loans to purchase products and services, including furniture and auto repairs, in states that do not allow high-cost loans.

Payment fraud

NCLC submitted testimony to Congress urging fraud protection for person-to-person payment apps, pushed the Federal Reserve to improve protections in its coming FedNow instant payments services, and highlighted the risks to consumers associated with a Central Bank Digital Currency. Advocates led a coalition in urging the U.S. Treasury and regulators to “do as much as possible” to discourage expanding use of crypto-assets, the “latest in a long line of devices used to strip wealth from communities of color and push them further behind.”

Student Loans

While borrowers are still awaiting word on whether the U.S. Supreme Court will allow President Biden’s student debt cancellation plan to provide transformational relief to tens of millions of Americans, we saw measurable progress for people whose financial well-being has been impeded by the broken student loan system. This year, the Department of Education took long overdue action to discharge loans for borrowers at several predatory for-profit schools, including granting relief to over half a million former Corinthian students as NCLC had petitioned and long advocated for, and to roughly 79,000 former students at the former Westwood College. NCLC, along with  Student Defense and the Lawyer’s Committee for Civil Rights Under Law, had filed a lawsuit against the Department seeking relief for defrauded Westwood students.

New rules will reduce loan costs by limiting interest capitalization and improve federal student loan cancellation programs for borrowers harmed by predatory school conduct or school closures as well as for public service workers and disabled borrowers. As advocated for by NCLC, legal aid organizations, AGs, and other state entities will be able to file group borrower defense claims on behalf of groups of borrowers harmed by their school’s predatory conduct.

The new “Fresh Start” program, which NCLC and our allies pushed for, will provide borrowers who were in default before the COVID crisis with an opportunity to get out of default and access lower cost repayment plans and other relief. And the IDR (income driven repayment) Account Adjustment and PSLF Temporary Waiver are allowing millions of borrowers who have been failed by poor servicing, lack of record-keeping, and program complexity to get credit toward eventually being debt free. These fixes followed years of NCLC’s efforts to shed light upon errors and broken promises in the IDR program, and NCLC’s advocacy with partner organizations to restore credit in this way.

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