FOR IMMEDIATE RELEASE: JULY 31, 2018

Contacts: National Consumer Law Center: Jan Kruse (jkruse@nclc.org) or (617) 542-8010;
Americans for Financial Reform: Carter Dougherty (carter@ourfinancialsecurity.org) or (202) 251-6700; Center for Responsible Lending: Ricardo Quinto (ricardo.quinto@responsiblelending.org) or (202) 349-1866

Special purpose “national bank” charters will allow nonbank lenders to ignore state interest rate caps

WASHINGTON – The Office of the Comptroller of the Currency’s (OCC) plan, announced today, to accept applications for “fintech” national bank charters, is both outside its authority and risks an expansion of predatory lending across the country, according to advocates at the National Consumer Law Center, Americans for Financial Reform, the Center for Responsible Lending, the Consumer Federation of America, and U.S. PIRG. National banks can ignore state interest rate limits, and the OCC is now planning to grant “national bank” charters to lenders that do not take deposits or otherwise function as traditional banks. A report released today by the U.S. Treasury Department also recommends that the OCC grant such charters. In 2017, more than 250 organizations sent a letter to the OCC opposing a fintech national bank charter.

“State interest rate limits are the primary protection against predatory lending, and giving ‘national bank’ charters to nonbank lenders could open the floodgates to a wide range of predatory actors making loans at 100 percent APR or higher,” said Lauren Saunders, associate director of the National Consumer Law Center. Two-thirds of the states cap a $2,000 loan at 36 percent or less, but a nonbank charter could allow lenders to avoid those limits.

“State interest rate limits currently save borrowers over $2.2 billion annually in fees on short-term payday and auto title fees alone,” said Diane Standaert at the Center for Responsible Lending, “but a national bank charter might allow high-cost lenders to make payday loans in states where they are illegal.”

“The OCC does not have the legal authority to hand out ‘national bank’ charters to entities that do not take deposits,” said Linda Jun at Americans for Financial Reform. “I expect the courts will stop this power grab by the OCC that takes away states’ ability to protect their citizens,” she added.

“Allowing nonbank lenders to ignore state interest rate limits is a dangerous step in the wrong direction and could repudiate the will of voters in South Dakota, Montana and many other states where people have overwhelmingly voted to limit interest rates to 36 percent or less,” said Christopher Peterson, director of Financial Services and Senior Fellow at the Consumer Federation of America.

“States have been leaders in protecting consumers from high-cost lenders,” added Ed Mierzwinski, senior director for consumer programs at U.S. PIRG. “The proposed OCC charter unwisely usurps those protections and could benefit predators, not innovators.”

Related Resources

Comments to the OCC from more than 250 organizations, the National Consumer Law Center, the Center for Responsible Lending, the Leadership Conference on Civil and Human Rights and NAACP, and Americans for Financial Reform opposing a fintech national bank charter.

Conference of State Bank Supervisors  lawsuit opposing the OCC establishing a national bank charter for fintech companies, Sept. 13, 2017

Poll Finds Continued Bipartisan Opposition to Payday Lenders, July 31, 2018

FOR IMMEDIATE RELEASE: JULY 27, 2018 || Contact: Jan Kruse (jkruse@nclc.org) or (617) 542-8010

Deepak Gupta, founding principal of Gupta Wessler PLLC, a national appellate, constitutional and complex litigation firm, has joined the board of the National Consumer Law Center (NCLC), with locations in Boston and Washington, D.C.

“Deepak’s deep understanding of consumer and constitutional law will provide fresh insight to help advance the National Consumer Law Center’s mission to protect low-income people from abuses in the financial marketplace, said National Consumer Law Center Executive Director Rich Dubois. “After many years of working with Deepak, we are very pleased that he has joined NCLC’s board.”

“National Consumer Law Center has been an indispensable partner to the public-interest legal community for nearly 50 years and I’m delighted to have the opportunity to support NCLC’s high-impact litigation and commitment to access to justice for all,” said Deepak Gupta.

Some of Mr. Gupta’s career highlights, as detailed in his full biography, include:

• Launching the amicus program at the Consumer Financial Protection Bureau, defending its first set of regulations in court, and helping to set the agency’s enforcement priorities;
• Winning numerous appellate victories for consumers under statutes including the Fair Debt Collection Practices Act and the Fair Credit Reporting Act;
• Fighting the spread of forced arbitration in the U.S. Supreme Court and before Congress and regulatory agencies, including a recent victory in the Ninth Circuit over the use of forced arbitration in the context of privatized criminal justice;
• In litigation over President Trump’s violation of the Constitution’s Emoluments Clauses, currently representing hotel and restaurant competitors of Trump’s businesses and the attorneys general of Maryland and the District of Columbia; and
• Successfully defending of firearms restrictions against Second Amendment challenges.

In addition to his litigation work, Mr. Gupta has testified before the U.S. Senate and the U.S. House of Representatives, taught as an adjunct professor of law, appeared on national television and radio, and has been featured in many major print and digital media stories.

Mr. Gupta joins ten other private bar and civil legal-aid attorneys who serve on the NCLC board. For a full listing of the board and their affiliations, please visit: https://www.nclc.org/about-us/leadership.html

FOR IMMEDIATE RELEASE: July 25, 2018

National Consumer Law Center Contacts: Abby Shafroth (ashafroth@nclc.org) or Jan Kruse (jkruse@nclc.org); (617) 542-8010

Education Department Proposes New Rules that Would Make it Much Harder for Students Harmed by For-Profit Schools to Get Loan Relief

Boston – Today, the U.S. Department of Education proposed new rules, replacing 2016 rules, that would make it much harder for students who are harmed by illegal school conduct or closures to get relief from their federal student loans or to hold schools accountable for illegal conduct. The Department proposes to severely restrict access both to “borrower defense” loan relief for students cheated by predatory schools that used illegal enrollment tactics and to loan relief for students whose schools closed before they completed their education.

“The federal student loan system is supposed to promote economic mobility and provide a ladder to a better future for low-income Americans,” said National Consumer Law Center attorney Abby Shafroth. “But for too many Americans it has done the opposite—putting targets on low-income, financial aid eligible students and veterans who are recruited by predatory institutions focused on growth and profit rather than on education and career training. It doesn’t have to be this way. The Department can and should apply rules that deter schools from lying to students to get them to enroll and that ensure students who were taken advantage of have real access to relief.”

Troublingly, the Department announced that it is considering severely restricting access to relief for student borrowers who are not in default. It is even considering refusing to allow students who are not in default to apply for borrower defense relief based on their school’s illegal conduct. Either alternative would unfairly punish borrowers who manage to stay out of default—and may even encourage default. The new rules would also narrow the grounds for federal student loan relief and eliminate the process to provide relief to groups of students who were subject to widespread misconduct or fraud. It would require students to submit more evidence (which borrowers often don’t have access to) and prove more difficult facts (such as what the school knew when providing false information). It would create a lopsided process that gives schools, but not students, the opportunity to respond to all the evidence and appeal adverse decisions. Additionally, the rule would make it harder for students to hold schools directly accountable for their illegal conduct by allowing schools to use forced arbitration clauses and class action bans to deprive students of their constitutional right to bring claims to an impartial judge or jury.

Moreover, despite recent widespread school closures that have left students with huge debts and no degree, the Department’s proposal would severely restrict federal student loan relief to students harmed by school closures. Its proposal would render students ineligible for closed school relief so long as their school provides an option to complete their program at a different school (as closing schools are generally already legally required to do), and would axe a 2016 rule that would have automatically discharged loans for eligible borrowers whose schools closed.

The Department has refused to implement borrower defense rules finalized in 2016 and plans to apply these new rules instead. Secretary of Education Betsy DeVos characterized the 2016 rules as making it too easy for student loan borrowers to get relief. The Department’s summary of the new rules states that they are designed to address concerns expressed by a for-profit school industry trade group and other industry representatives that the 2016 rules would impose financial liabilities that might imperil the viability of some schools. The proposal reflects an ongoing shift to protecting the multi-billion dollar for-profit education industry at the expense of students, and comes at a time that concerns about conflicts of interest have been raised about the role of former for-profit school executives hired by the Department.

Shafroth, a staff attorney for the National Consumer Law Center’s Student Loan Borrower Assistance Project, participated as a representative for legal aid organizations in rulemaking meetings held by the Department of Education in Washington, D.C. that preceded this proposed rule. Shafroth and other representatives for students, veterans, and low-income borrowers made numerous suggestions to the Department to ensure that the rule would provide student borrowers reasonable access to relief, but those suggestions were not included in the proposed rule.

“If these proposed rules are implemented, schools will continue to break the law and harm students with impunity, and student borrowers will continue to pay the price,” said Shafroth. “We urge the Department of Education to promptly implement the 2016 rules and to use this rulemaking to make it easier, not harder for students to get relief. We also urge students and the people who care about them to send comments to the Department of Education telling it to put students and taxpayers first over predatory schools.”

Related NCLC Resources

Issue Brief: The Borrower Defense Rule protects students and taxpayers against fraud and abuse in higher education. (January 2017)

Comments of NCLC to the Department of Education Re: Borrower Defense Rule Delay and Intent to Establish Negotiated Rulemaking Committee (July 12, 2017)

Comments of NCLC and 16 other legal aid groups to the Department of Education re: Proposed regulations on borrower defenses and use of forced arbitration by schools in the Direct Loan Program, and proposed amendments to closed school and false certification discharge regulations. (August 1, 2016)

Blog: Who is the Department of Education Looking Out For? Another Delay of Student Protections Follows a String of Actions Protecting Industry Profits Over Students

Further Information on school-related cancellation of federal student loan debt.

FOR IMMEDIATE RELEASE: July 3, 2018

National Consumer Law Center contacts: Olivia Wein (owein@nclc.org) or (202) 452-6252; Jan Kruse (jkruse@nclc.org) or (617) 542-8010

Advocates Ask FCC to Delay Implementation of Changes to the Tribal Lifeline Program While D.C. Circuit Completes Review

WASHINGTON — Today, consumer advocates, alongside tribal, civil rights and faith-based groups, voiced their support for efforts by the Crow Creek Sioux Tribe, the Oceti Sakowin Tribal Utility Authority, and wireless service providers (Joint Petitioners), to delay implementation of expansive changes to the Tribal Lifeline Program. The groups sent a letter to the Federal Communications Commission (FCC) urging it to delay rule changes outlined in its Fourth Report and Order (Tribal Order), which would disrupt affordable voice and broadband access for thousands in Indian Country, until the conclusion of a review sought by Joint Petitioners in U.S. Court of Appeals for the D.C. Circuit.

If the Commission’s Tribal Lifeline Order is to take effect while the court appeal is pending, “residents of Tribal lands will be put at risk of consumer confusion, at best, and loss of phone and broadband service, at worst,” advocates warned in a letter submitted to the FCC today.

The federal Lifeline program, created in 1985, helps low-income consumers afford voice, wireless, and broadband internet service by providing qualified recipients with a $9.25 monthly credit toward the costs of service. The Tribal Lifeline program provides an enhanced Tribal benefit, an additional $25, to eligible consumers who live on Tribal lands.

The FCC’s Tribal Order makes substantial changes to the Tribal Lifeline program by prohibiting Lifeline carriers without their own network infrastructure (non-facilities based providers like Petitioners Assist Wireless, enTouch Wireless and Easy Wireless) from receiving the enhanced Tribal benefit. The Tribal Order also limits the availability of the enhanced Tribal benefit geographically to those living in rural Tribal areas. Taken together, the impact of these changes could be profound.

Approximately two-thirds of the more than 418,000 low-income Tribal Lifeline subscribers purchase voice and broadband internet services from non-facilities based providers. The FCC’s plans to boot a majority of providers from the Tribal Lifeline Program could impact more than a quarter of a million low-income Tribal residents, who had insufficient notice of these changes.

“The advocacy community was very disappointed by the FCC’s failure to engage in government-to-government Tribal consultations per the FCC’s own long-established procedure concerning proposals that impact Indian country,” said Olivia Wein, an attorney with the National Consumer Law Center. “Granting this stay is reasonable given the potential harm. Even if the Tribes and carriers ultimately prevail in court, the implementation of these changes, beginning with consumer notices, will be hard to undo and could result in Tribal Lifeline subscribers facing confusion and disruption, or total loss, of voice and broadband services if carriers pull out of the Lifeline marketplace.”

The effective date of the FCC’s Tribal Order is in flux but it could go into effect by October 2018–forcing providers to notify Tribal Lifeline subscribers of the changes in August 2018. Hence the urgency of the request for a delay of the Order.

Additional resources:

Learn more about the Lifeline program and how it helps seniors, veterans, students, and survivors of domestic violence all across the nation to remain connected, and review state-by-state enrollment data.

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