FOR IMMEDIATE RELEASE: March 28, 2019
National Consumer Law Center contacts: Lauren Saunders (lsaunders@nclc.org) or (202) 595-7845; Jan Kruse (jkruse@nclc.org) or (617) 542-8010

Download issue briefs summarizing protections for prepaid cards and accounts, payroll cards, and government benefit prepaid cards at https://www.nclc.org/issues/prepaid-debit-cards.html.

(WASHINGTON) A new rule issued by the Consumer Financial Protection Bureau (CFPB) goes into effect April 1 providing protections for prepaid cards, payroll cards, government benefit cards, and certain mobile and online person-to-person payment services.

“Consumers who shop for prepaid cards will finally have clear, easy to compare fee charts and peace of mind that their accounts, once registered, are protected from unauthorized charges. Employers will have to make clear that workers cannot be required to accept their pay on a payroll card and will have to disclose fees before workers make their choice,” explained Lauren Saunders, associate director of the National Consumer Law Center.

Before the prepaid accounts rule, many prepaid cards were not covered by the protections of the Electronic Fund Transfer Act; payroll and government benefit cards were covered, but did not always come with clear fee disclosures. The rule was initially finalized in 2016 under former CFPB Director Rich Cordray, but technical changes were subsequently made and implementation was delayed until this year.

In addition to fee disclosures and basic protections against loss or theft, the rule also restricts overdraft fees on prepaid accounts. “Prepaid cards are an important option for people who have been burned by bank overdraft fees or cannot get a bank account. Unfortunately a few prepaid cards have had overdraft fees, Hopefully, with the limits of the new rule, overdraft fees on prepaid cards will now be a thing of the past. But look out for cards like the NetSpend ‘ACE Flare Account by MetaBank’ and the ‘NetSpend All-Access Account’, which may try to evade the overdraft fee limits by claiming that they are checkless checking accounts and not prepaid cards,” Saunders warned. NetSpend typically sells its cards at payday loan stores.

The prepaid accounts rule covers accounts whether they are accessed through a physical card or through mobile or electronic devices. Thus, the rule protects funds held in accounts, such as PayPal and Venmo.

Prepaid Accounts Will Now Receive Several Key Protections

1. Protection from unauthorized charges and errors. However, protection only begins after a consumer registers the card in their name.
2. Clear, uniform fee charts. A short chart of key fees will be on the outside of the package and provided online before purchase. More details will be on a longer chart inside the package and online at the URL provided on the package.
3. A warning if funds are not FDIC insured. But most prepaid accounts have FDIC insurance once they are registered.
4. Basic account information for free, including account balances by telephone and transaction information online and by mail on request.
5. Choice for employees and recipients of certain government benefits. The rule clarifies existing rules that employers and government agencies cannot require consumers to receive wages or benefits in a particular account.
6. Limits on overdraft fees and features. Cards that offer overdraft features must disclose that fact on the package and wait 30 days before offering overdraft coverage. These hybrid prepaid-credit cards must comply with credit card and “fee harvester” rules, including a requirement to determine ability to repay, to limit total overdraft fees in the first year to no more than 25% of the credit line extended, and to give the consumer a choice of whether to permit automatic repayment.
7. Public and consumer access to account agreements and fee schedules. All prepaid account issuers, including issuers of payroll and government benefits accounts, must submit their account agreements annually to the CFPB. Companies that offer cards to the general public must post fee information online.

The prepaid accounts rule covers:

• Accounts labeled or marketed as “prepaid” and usable at unaffiliated merchants or at ATMs;
• Accounts, other than checking accounts, whose primary function is to conduct transactions with multiple unaffiliated merchants, at ATMs, or for person-to-person transfers;
• Payroll cards offered by employers; and
• Government benefits prepaid cards used by the federal government for Social Security, SSI, and other benefits, and also those used by state or local agencies to distribute non-needs tested benefits, such as unemployment insurance.

 Related NCLC Resources

New Protections for Prepaid Card Accounts, March 2019

New Protections for Payroll Cards, March 2019

New Protections for Government Benefit Prepaid Cards, March 2019

Report: Payday Lender Prepaid Cards, July 2015

National Consumer Law Center’s Consumer Banking and Payments Law 2018 6^th ed.

FOR IMMEDIATE RELEASE: March 28, 2019

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

(Washington) The Federal Communications Commission (FCC) has proposed to cap the Universal Service Fund programs, which provide essential funding for affordable telecommunications services for low-income households and supports affordable broadband in rural areas, and for schools, libraries and rural healthcare facilities.

Following is a statement from National Consumer Law Center Staff Attorney Olivia Wein regarding the proposed change.

“Affordability is a main barrier for low-income households to access essential communications. A new report by the Consumer Financial Protection Bureau finds that telecommunications debt is one of the most common types of debt sought by creditors or debt collectors. It is premature for the FCC to consider capping the Lifeline telecommunications program, which is funded through the Universal Service Fund, as it plays a critical role in bridging the digital divide for low-income households and will unnecessarily ration Lifeline support. Instead the FCC should ensure a competitive Lifeline marketplace with products that help close the homework gap, facilitate telemedicine, and help people to find and keep jobs.”

April 17, 2019 at 2:00-2:30PM (ET)

Speakers:
Lauren Saunders, Associate Director (National Consumer Law Center)
Dana Wiggins, Director of Outreach and Financial Advocacy (Virginia Poverty Law Center)

Join us for a quick, 30-minute webinar designed for legal services organizations on how you can help us defend the Consumer Financial Protection Bureau’s (CFPB) payday loan rule and how you can help your clients who are stuck in un-affordable payday loans. You are welcome to join us even if you are not with a legal services organization. The webinar will be Wednesday, April 17 at 2:00 pm Eastern time and we will cover:

• What parts of the payday loan rule are going into effect August 19, 2019 and what parts the CFPB has proposed to rescind;
• The status of the fight over the rule and coalition strategy;
• How legal services organizations, including those funded by the Legal Services Corporation, can help defend the rule;
• What type of comments and stories will be most helpful for the May 15, 2019 comment deadline;
• Tips for helping clients stuck in payday loans, including both illegal online loans and legal storefront ones.

We hope you can join us! Can’t wait for the webinar or want to do more? Contact Lauren at lsaunders@nclc.org.

There is no charge for this webinar and all time listings are in Eastern Time. NCLC does not provide CLE credits for webinars, but will give certificates of attendance following the webinar for those who are interested.
If you are unable to attend the webinar, rest assured that it will be archived on the NCLC webinar page. Still have questions? Please email SarahEmily Pina at spina@nclc.org.

National Consumer Law Center Recommends Reforms to Mitigate Harms to Families by Private Corporations Administering Our Criminal Legal System

For Immediate Release: March 20, 2019
National Consumer Law Center contact: Jan Kruse, jkruse@nclc.org or (617) 542-8010

Download the full report, including an analysis of harms, a sector-by-sector overview, graphic on the Private Criminal Legal System Cycle, and complete list of policy recommendations at: http://bit.ly/2W7zq9E

Boston – Across the nation, the creeping commercialization of the criminal legal system—abetted by the long-term trends of privatization and cost-shifting to “users” of the system and their families—has resulted in widespread abuses. From commercial bail to supervisory monitoring and from prison services to court-ordered rehabilitation programs, the corrections industry—estimated to exceed $74 billion as of 2012, the most recent year available—now provides a range of high-cost services and financial products to low-income people facing extreme pressures and limited or no choices. This is a toxic recipe for abuse.

Commercialized (In)Justice: Consumer Abuses In the Bail and Corrections Industry, a new report from the National Consumer Law Center, highlights how private companies are profiting from financial extractions taken from vulnerable individuals based on their exposure to the criminal legal system. As the report documents, the corrections industry operates largely without consumer regulation or government enforcement—even as companies often take advantage of the threat of criminal consequences and consumers’ lack of knowledge about their rights. In exchange for exclusive contracts, companies frequently offer kickback payments to cash-strapped corrections agencies. And corporate consolidation and weak competitive pressures have resulted in a handful of large conglomerates, leveraging power in one market to increase share in another.

“At each step of our modern punishment continuum, private companies are maneuvering to extract wealth from poor, heavily-policed communities,” said attorney Brian Highsmith, National Consumer Law Center Skadden Fellow and author of the report. “This system perpetuates harmful cycles of poverty and consumer debt for vulnerable families, and is especially devastating to low-income communities of color,” said Highsmith.

Key Findings                                                                                             

The report documents the many ways in which Americans who have contact with the criminal legal system are subjected to costs imposed by private industry: from the moment of arrest (and sometimes even before), through the trial and sentencing process, during incarceration, and extending to post-release supervision and reentry programs. These commercial transactions push families deeper into poverty and make it harder for people who have interactions with the criminal justice system to get back on their feet.

The report also frames the expanding reach of the modern corrections industry through the intersection of two troubling trends: (1) the outsourcing of the criminal legal system to the private sector—traditionally public services, and (2) imposing fines and fees on mostly low-income defendants and their families to fund the criminal legal system. Per capita spending on the criminal legal system grew by 40% nationwide between 1993 and 2012. During this time, state and local governments have sought to shift the cost of operating the criminal legal system onto those who have contact with the system and their loved ones, particularly through the assessment of fines and fees on those accused of criminal activity. At the same time, they have outsourced various core functions of their criminal legal systems—traditionally public services—to private corporations operating to maximize profit for their owners and investors. The corrections industry’s growth exacerbates these trends, combining the conflicts of interest endemic in so-called “user-funded” financing structures with the lack of public accountability that advocates have long criticized in the private prison context.

Specifically, companies aggressively market their services to states and local governments as a way to achieve cost “savings” for existing corrections functions—and in many cases, to generate new revenue streams through kickback payments. But almost inevitably, these arrangements sharply increase the financial costs imposed on economically fragile individuals processed through the criminal justice system.

Private companies face incentives to make decisions based on what is in their and their investors’ financial interest—which often directly conflicts with public policy goals. For example, companies may exercise decision-making authority affecting the consumers’ criminal punishment at the same time as they stand to profit from extensions of such punishment.

Key Recommendations for Policymakers

• Prohibit commission payments in all forms and require that agencies negotiate contracts based on delivering the best value to consumers;
• Prohibit “offender-funded” contracts and align companies’ incentives with positive outcomes;
• Fund the full cost of the criminal justice system—including services provided by private companies—from government general revenues, rather than pushing it onto individuals processed through the system and their families;
• Reform policies concerning imposition and collection of financial obligations on individuals impacted by the criminal legal system so that that they do not trap people in poverty or lead to harsher punishment for defendants simply because they are poor; and
• Ensure that companies performing functions of our criminal legal system be subject to the same, or substantively similar, public records requirements as government agencies.

“Today, 1 in every 37 American adults is under some form of correctional supervision—more than any other nation in the world,” said Highsmith. “By pushing for reform, advocates can strengthen accountability for the unfair and unlawful practices that are now widespread, and ultimately move toward eliminating exploitative profiteering and other economic injustices from our criminal system.”

This report builds on NCLC’s work on the criminalization of poverty in various consumer law contexts. For more information, visit: https://www.nclc.org/issues/criminal-justice.html.

FOR IMMEDIATE RELEASE: MARCH 18, 2019
National Consumer Law Center contact: Jan Kruse (jkruse@nclc.org) or (617) 542-8010

Trump calls for elimination of Legal Services Corp and home energy assistance; supports cuts and changes to weaken the Consumer Financial Protection Bureau and Social Safety Net for Older Adults

Washington – President Trump’s proposed budget  once again seeks to eliminate funding for programs that have bipartisan support that help rural families, elders, struggling families, and veterans, according to advocates at the National Consumer Law Center. Additionally, the Consumer Financial Protection Bureau would be severely weakened due to drastic cuts and changes to weaken its independence.

“Legal services programs serving urban and rural areas in every state around the country are there for veterans, seniors, and struggling families when they need legal help to transition from military service, to save their homes from foreclosure, to protect the Social Security funds they need to buy food, or to stop domestic violence.” said Rich DuBois, executive director of the National Consumer Law Center. In the words of the late Justice Antonin Scalia, the Legal Services Program ‘pursues the most fundamental of American ideals, and it pursues equal justice in those areas of life most important to the lives of our citizens,’” he added.

The Legal Services Corporation (LSC) has broad bipartisan support, and the proposed elimination of LSC over the last two years was opposed by the heads of over 150 law firms in all 50 states, 185 leaders of corporate legal departments, the Conference of Chief Justices and the Conference of State Court Administrators.

“The budget also proposes drastic cuts to the Consumer Financial Protection Bureau and changes that would weaken its independence from Wall Street lobbyists,” noted Dubois

Trump’s budget would also eliminate the Low Income Home Energy Assistance Program (LIHEAP), the low-income Weatherization Assistance Program (WAP) and the Community Service Block Grant (CSBG) program — three safety net programs that protect the health and safety of low-income families who have trouble paying their energy bills, and provide the core funding for the front-line community groups that deliver these programs in all 50 states.

“President Trump’s proposed budget for FY 2020 once again would leave poor older adults, individuals with disabilities, and families with young children out in the cold by zeroing out funding for critical health and safety programs,” said Olivia Wein, staff attorney with the National Consumer Law Center. “We urge Congress to stand up for struggling households and adequately fund these essential programs.”  Wein also urges the U.S. Health and Human Services Department to reverse course by withdrawing its notice that it would reallocate the remaining FY2019 LIHEAP funds. “The remaining $37 million from last year’s appropriation is particularly timely and needed by the states to assist low-income families after the increase in heating bills from the polar vortex that swept through a large portion of the country this winter,” Wein noted.

LIHEAP and WAP are targeted to help vulnerable populations, including the elderly and families with young children, which are at risk from severe health complications, including death, from frigid winters and sweltering summers. LIHEAP provides bill assistance for families so they can afford essential home heating and cooling to stay safe. WAP provides cost-effective long-term measures to make drafty homes weather-tight and lower energy bills year after year. CSBG funds community action agencies that are the front-line service agencies that deliver LIHEAP and WAP assistance.

Additionally, the budget includes cuts to Medicaid, Medicare, and Social Security. “We’ve already seen a sharp uptick of older adults filing for bankruptcy over the last few years, and the proposed cuts in these programs will mean even more older adults will be at risk of economic distress by using credit cards as a plastic safety net to cover essential living expenses,” said National Consumer Law Center attorney Odette Williamson. “These proposed cuts are tragic as many older adults, especially women who have lost spouses, live on reduced resources and depend on Social Security to keep them out of poverty.”

“As a candidate, President Trump said he would work for ordinary families but his draconian cuts will result in heart ache for regular Americans, especially our most vulnerable families,” added Dubois.

This National Consumer Law Center report examines the growing problem of consumer abuses by private companies profiting from the U.S. criminal legal system and mass incarceration, disproportionately affecting people of color and low-income people, and makes recommendations for reform.

Report (PDF) Executive Summary (PDF) Key Findings Key Recommendations Flow chart/Infographic: The Private Criminal Legal System Cycle (PDF) Press Release

Published: March 2019

Related Resources

• NCLC lawsuit challenging an illegal kickback scheme between the Bristol County (MA) sheriff’s office and telecom giant Securus Technologies that nearly doubles the cost of calls made by prisoners in Massachusetts correctional facilities. Pearson et al v Hodgson and Securus Technologies, Inc,
• NCLC lawsuit filed against insurance companies underwriting California bail bonds, challenging a scheme to inflate the price of bail premiums.  Crain & Serna v Accredited Surety and Casualty Co., et al
• NCLC lawsuit challenging New Orleans bail bond companies charging illegal fees and engaging in other abusive practices, in violation of consumer protections.  Egana v Blair’s Bail Bonds, Inc.

NCLC’s body of work on the intersection of criminal and consumer law, including reports and free webinars.

Overview

Since 1980, the number of people incarcerated in America increased from roughly 500,000 to over 2.2 million, and currently 4.5 million people across the nation are on probation or parole. During this time, state and local governments have sought to shift the cost of operating the criminal legal system onto those who have contact with the system and their loved ones, particularly through the assessment of fines and fees on those accused of criminal activity. At the same time, governments (federal, state, and local)  have outsourced various core functions of their criminal legal systems—traditionally public services—to private corporations operating to maximize profit for their owners and investors. These trends have led to the growing problem of “commercialized injustice”—consumer abuses perpetuated by private companies profiting from the criminal legal system and mass incarceration.

Low-income people entangled with these systems are subjected to costs imposed by private industry at every step in the process. As a result, these individuals and often their loved ones take on onerous debt, trapping many people in poverty. Many of the practices common in the corrections industry violate not only constitutional protections but also federal and state laws designed to protect consumers and ensure fairness in financial marketplaces.

Key Findings

• The corrections industry pitches itself to states as way to relieve fiscal pressure (created in part through mass incarceration)—but increases costs for individuals.  Costs of the criminal legal system are transferred from what previously was borne by government onto the individuals processed through the system and their families, and are further inflated to generate private profits.
• The commercialized criminal legal system imposes its costs on vulnerable people least able to pay. These individuals are more likely to be people of color, due to discriminatory policing and sentencing practices, and low-income people as economically oppressed communities are frequently targeted by law enforcement.
• Private companies extract wealth from communities at each step of the correctional system. These steps include pre-arrest diversion programs, bail and pre-trial monitoring, jail and prisons services, and post-incarceration services such as probation and rehabilitation and treatment programs.
• These commercial transactions push families deeper into poverty and make it harder for people who have interactions with the criminal justice system to get back on their feet.

Key Recommendations

Advocates and policymakers can work to address these abuses by:

• Collecting information and raising awareness;
• Demanding effective public supervision;
• Representing individuals with legal system contact and initiating impact litigation; and
• Pushing for new policy reforms, including:
  • Prohibiting commission payments in all of their forms and requiring that agencies negotiate contracts based on delivering the best value to consumers and providing services in a manner that furthers the public interest.
  • Prohibiting “offender-funded” contracts, and instead aligning companies’ incentives with positive outcomes.
  • Eliminating other conflicts of interest that tie a company’s profits to the financial obligations shouldered by program participants or the length of time individuals remain under supervision.
  • Funding the full cost of the criminal justice system, including services provided by private companies, from government general revenues, rather than extracting it from the often low-income individuals (and their families) processed through the system.

Surviving Debt

Fair Debt Collection

FOR IMMEDIATE RELEASE: March 11, 2019

National Consumer Law Center contact: Jan Kruse (jkruse@nclc.org) or (617) 542-8010

National Consumer Law Center Urges Regulators and Policymakers to Maintain Consumer Protections and Proceed with Caution

Download the report at: http://bit.ly/2Tx9BmG

Washington – The use of technology in financial products and services (fintech) is resulting in a wide array of new approaches to financial products and services. A new report from the National Consumer Law Center provides a snapshot of some of the developments, potential promise, and potential concerns posed by fintech.

“Fintech products and services have the potential to provide important benefits to consumers, but innovation and fintech approaches are not invariably positive,” said Lauren Saunders, associate director of the National Consumer Law Center and author of Fintech and Consumer Protection: A Snapshot. “It’s important for regulators and policymakers to understand first and proceed with caution. Many fintech products are old wine in new bottles or pose new risks, and the allure of shiny fintech products should not be an excuse to weaken consumer protection rules and oversight, especially for untested new products and services.”

The internet, mobile devices, big data, computer algorithms, and other technologies are impacting the way we borrow, make payments, and manage our money. These technologies are also changing the way that entities from credit reporting agencies to debt collectors affect and interact with us. New products may provide benefits for consumers but also may carry hidden or unintended negative consequences, or risks that are not obvious at first. “The dangerous pick-a-payment and exploding adjustable rate mortgages that fueled the foreclosure crisis leading to the Great Recession of 2008 were innovations. New technology enabled banks to encourage overdraft fees on debit cards that can turn a $5 cup of coffee into a $40 one,” explained Saunders.

The fintech label also does not necessarily mean that much is different. Products and services are constantly evolving, but sometimes the more things change the more they stay the same. Old problems can arise in a new package, and promised benefits of fintech products may not actually materialize.

Just because a product uses new technology does not mean that older protections do not or should not apply or that regulators do not know how to approach a product. It is crucial to look at fintech products carefully and critically, to understand the risks, and not to accept unproven hype about benefits to consumers, the report cautions.

While the issues raised by fintech products are as myriad as the products themselves, some common themes, issues, and risks span many fintech products.

Common Potential Benefits

• Better, faster, cheaper.
• Fixing old problems as a market opportunity.
• Personalization.
• Access for underserved consumers.

Common Concerns and Potential Problems

• Old wine in new bottles; same old problems in a new form.
• Lack of transparency about the costs and business model.
• Disparate impacts and the perils of big data, privacy, and security.
• Avoidance of consumer protection laws.
• Fast and easy can cause problems.
• No humans, no records, and lack of customer service when things go wrong.
• Forced arbitration weakens accountability for wrongdoers.

“While fintech products pose a myriad of concerns, some do offer real benefits for consumers,” said Saunders. “It is essential that policymakers, regulators, and consumers keep their eyes wide open and expend the effort to dig deep to understand fintech products and services. A desire to promote innovation must not lead us into waiving consumer protection rules or oversight of untested products.”

Analysis and Recommendations

• No Hope for Homeowners: The Administration’s Home Affordable Unemployment Program Hurts the Unemployed, July 2010

• Home Affordable Modification Program: Borrower Notices Fall Short, November 2009

• Homeowners Need Mandatory Loan Modifications and Expanded Access to Mediation; Current Programs Fall Short, September 2009

• NCLC’s Home Affordable Modification Program Recommendations, July 2009

• NCLC’s Home Affordable Modification Program Recommendations, March 2009

Policy Briefs, Reports & Press Releases

• Report: At a Crossroads: Lessons from the Home Affordable Modification Program (HAMP), January, 2013

• HAMP Changes Urgently Needed, September 2010

• Press Release: Why Servicers Foreclose, When They Should Modify, and Other Puzzles of Servicer Behavior, October 2009

• Report w/above press release

• NCLC Reports: Special Issue on Mortgage Modification Programs, March/April 2009

Testimony

• Testimony of Diane Thompson before the Senate Committee on Banking, Housing, & Urban Affairs: Problems in Mortgage Servicing from Modification to Foreclosure, November 2010

• Testimony of Alys Cohen before the Subcommittee on Housing and Community Opportunity: The Recently Announced Revisions to the Home Affordable Modification Program (HAMP), April 2010

• Testimony of Alys Cohen before Subcommittee on Housing: Progress of the Making Home Affordable Program: What Are the Outcomes for Homeowners and What are the Obstacles to Success?, September 9, 2009

• Testimony of Diane Thompson before the Senate Committee on Banking, Housing, & Urban Affairs: Preserving Homeownership: Progress Needed to Prevent Foreclosures, July 2009

• Testimony of Tara Twomey before the House of Representatives Committee on Financial Services on the Implementation of the HOPE for Homeowners Program and a Review of Foreclosure Mitigation Efforts, September 2008

FOR IMMEDIATE RELEASE: March 5, 2019

National Consumer Law Center:  John Howat (jhowat@nclc.org); Stephen Rouzer (srouzer@nclc.org) or (202) 595-7847

Despite using the least energy, households with the least means are shouldering the greatest energy burdens

WASHINGTON ― A new report, “Reversing Energy Systems Inequity: Urgency and Opportunity During the Clean Energy Transition,” examines fundamental inequities of our current energy landscape, which can lead to dangerous repercussions, and the unprecedented opportunities arising to address the issue while our nation undergoes sweeping changes to its power sector.

“Low-income families are making difficult survival decisions as high energy burdens weigh heaviest on those with the least,” said John Howat, senior policy analyst at the National Consumer Law Center. “A transition to clean energy systems must be seen as an opportunity for utility commissions to bring much-needed equity to an energy system that disadvantages low-income consumers.”

Through a series of visuals, broken down by region, the report illustrates that while it’s widely recognized that access to electric service is vital to health and safety, affordable access is not an equal opportunity proposition. Despite using less energy, low-income households use the largest amount of their income to meet their family’s needs, and they are often forced to make difficult survival decisions to do so.

Roughly 30 percent of households with incomes below $40,000 forego or cut back on other basic necessities — such as food, clothing or medicines — in order to pay energy bills and maintain service. As many as 40 percent of households with incomes below $20,000 suffered the same consequences of high energy burdens.

The brief report looks at three keys to succeed in creating opportunities to improve equity for lower-income households amidst technological advancements and a public appetite for a clean energy transition. While the list is not exhaustive, the points highlighted are foundational for getting decisions right for residential customers with the least means.

• DATA: Collection and distribution of comprehensive residential customer data, broken out for low- and moderate-income and vulnerable ratepayers.

• PROCESS: An inclusive regulatory process that formally links identification of equity impacts with consideration and adoption of measures to address them.

• EDUCATION: Broad familiarity with the full range of programs and best practice protections to address economic inequities for low-income consumers.

The report features a story reported by the Washington Post and local media in Newark, New Jersey of 68-year-old Linda Daniels, who died of heart failure after the local power company disconnected electricity to her home because of an alleged overdue bill―a potent reminder that electricity must be there when needed, for everyone.

“With the imperative to curb climate pollution everywhere we can, as quickly as we can, this time of transition should be viewed as the time to achieve another imperative simultaneously — building a more equitable energy landscape in America, hand in hand with a cleaner one,” the report said.

The report is co-authored by John Howat, senior policy analyst at the National Consumer Law Center; John T. Colgan, senior consultant at Colgan Consulting; Wendy Gerlitz, policy director at NW Energy Coalition; Melanie Santiago-Mosier, senior director of the Access & Equity Program at Vote Solar; Karl R. Rábago, executive director at Pace Energy and Climate Center

A PDF of the report is available for download on NCLC’s website and more information on energy inequities and programs to assist low-income consumers can be found on NCLC’s Energy, Utilities, and Telecommunications page.

FOR IMMEDIATE RELEASE: March 4, 2019

National Consumer Law Center:  Stephen Rouzer (srouzer@nclc.org) or (202) 595-7847

Consumer Advocates Urge Strong Consumer Protections for Borrowers of Property Assessed Clean Energy (PACE) Loans

WASHINGTON– Today, advocates at the National Consumer Law Center applauded the Consumer Financial Protection Bureau (CFPB) for taking its first step in initiating a rulemaking to curtail consumer abuses in the PACE loan program and urged the Bureau to develop strong protections to curb widespread program abuse.

“PACE lenders evade mortgage laws, enabling contractor fraud, promoting elder financial abuse, and causing problems for homeowners looking to refinance or sell their homes, all while providing insufficient and at times minimal energy savings,” said John Rao, staff attorney at the National Consumer Law Center. “The CFPB’s plan to enact PACE regulations, mandated by Congress, is important to reform the PACE loan program and adopt sorely needed consumer protections.”

In October, in an unusual coalition, groups representing the mortgage lending industry, including the American Bankers Association and the Mortgage Bankers Association, joined consumer advocates in a letter sent to the CFPB urging a rulemaking to address “the hidden way in which PACE loans have developed outside our consumer protection framework.”

PACE programs offer loans for energy efficient home improvements, such as solar panels, HVAC systems, and energy efficient windows, along with more questionable items such as “cool coat paint.” PACE loans, offered through home improvement contractors, often in door-to-door sales, and secured by a property tax lien, are collected through a property tax assessment that takes priority over any existing mortgage. PACE programs must be authorized by state and local governments, but are privately run with little or no government oversight.

Over the last two years, there has been a sharp increase in homeowners seeking assistance from legal services and other organizations in relation to PACE loans. “The goal of improving home energy efficiency is being overshadowed by the lack of adequate consumer protection for these loans. Weak PACE loan regulation enables contractors to saddle homeowners with debt they cannot afford and puts their homes at risk for foreclosure,” Rao explained.

Legislation last year, the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155, the “Crapo Bill”), requires the Bureau to issue “ability to repay” requirements with respect to PACE loans and to allow consumers to recover damages and access foreclosure defense and other remedies. “The CFPB must adopt ability-to-repay requirements for PACE loans and must also ensure that consumer protections required of other mortgage products, such as know-before-you-owe disclosures and the right to cancel, apply to PACE,” said Rao.

To learn more about the consumer impact of PACE loans read NCLC’s 2017 issue brief.