National Consumer Law Center Advocate Statement Opposing Sen. Alexander’s Legislation to Reform Higher Education Act
FOR IMMEDIATE RELEASE: September 26, 2019
National Consumer Law Center contact: Jan Kruse (jkruse@nclc.org) or (617) 542-8010
Boston – Statement of Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, in response to today’s introduction of a scaled-back higher education bill by Senator Lamar Alexander:
“Students and borrowers need real, wholesale reform of the Higher Education Act to make it easier for borrowers to succeed in student loan repayment and ensure that falling behind does not threaten families’ financial security. We also need to hold institutions accountable for misconduct as well as to provide relief to harmed students and empower students and borrowers to vindicate their rights. Senator Alexander’s piece-meal approach ignores this urgent need for reform and attempts to hold hostage funding that is expiring for historically black colleges and universities and other minority serving institutions that should be addressed separately. We hope that Congress will reject this bill and work towards a real solution for struggling students and borrowers.”
For NCLC’s recommendations on reauthorization of the Higher Education Act, see:
Comments on Reauthorization of the Higher Education Act of 1965 to the Senate Committee on Health, Education, Labor and Pensions, February 23, 2018
U.S. House Financial Services Committee Hearing on September 26 on Abusive Debt Collection with Testimony by National Consumer Law Center Attorney April Kuehnhoff
FOR IMMEDIATE RELEASE: September 25, 2019
National Consumer Law Center contact: Jan Kruse, jkruse@nclc.org or (617) 542-8010
National Consumer Law Center attorney April Kuehnhoff’s full testimony will be available by 10 am ET on September 26 at: http://bit.ly/testimony-kuehnhoff
Washington, D.C.- National Consumer Law Center attorney April Kuehnhoff will testify on Wednesday, September 26 at 10 am E.T. before the U.S. House Financial Services Committee at a hearing entitled “Examining Legislation to Protect Consumers and Small Business Owners from Abusive Debt Collection Practices.”
“Nearly one-third of Americans have a debt in collection and third-party debt collectors contact consumers more than one billion times each year,” says National Consumer Law Center attorney April Kuehnhoff. “For the vast majority of these consumers, it not an unwillingness to pay their debts but other factors that lead people into the hands of debt collectors, including stagnating wages, job losses, divorce, health problems, predatory lending, and a weakening financial safety net. Americans of all stripes face debt collection, but those with lower incomes or who live in communities of color, limited English speakers, older Americans, and servicemembers face special challenges and often a disproportionate burden from debt collection. It’s essential that the Consumer Financial Protection Bureau’s final debt collection rule include stronger consumer protections because its current proposal protects abusive debt collectors much more than consumers. Congress also has a role to play to clarify or improve the 42-year old Fair Debt Collection Practices Act through legislation.”
In her testimony, Kuehnhoff will discuss that data from a CFPB survey suggests that millions of Americans were sued in debt collection lawsuits during the one-year period covered by the survey. Many of these lawsuits are filed by debt collection firms that churn out suits, clogging the courts. Collectors often win through default judgments when the consumer does not appear in court, often because the person did not receive notice of the lawsuit. Even when consumers do appear, more than 90% are not represented by an attorney, increasing the odds that they will lose. Collecting on time-barred “zombie” debt is another unfair, deceptive, and abusive tactic because the debt is so old that the deadline for a lawsuit has passed and records of who owes the debt and for how much may be lost.
In addition to discussing how the CFPB can strengthen its proposed rule, Kuehnhoff will discuss several bills before Congress that would provide clarity and update remedies for unfair and deceptive debt collection practices for consumers and small business owners, including:
Small Business Lending Fairness Act (H.R. 3490) would prohibit a serious problem created by the failure of consumer protection laws to cover credit extended to small businesses. High cost lenders offer loans to struggling small businesses throughout the U.S, often with a treacherous provision hidden in the fine print of the loan documents. If the small business fails to pay the loan back on time, the lender can trigger a “confession of judgment,” allowing the lender to seize all of the business’s assets, including emptying out bank accounts.
Debt Collection Practices Harmonization Act (H.R. 3948) would expand the definition of debt covered under the FDCPA to include money “owed to a State,” clarifying that private collectors who pursue debts such as municipal utility bills, tolls, traffic tickets, and court debts are covered by the FDCPA. It would also modernize FDCPA remedies by adjusting monetary penalties for inflation and clarifying that courts can award injunctive relief.
Stop Debt Collection Abuse Act of 2019 (H.R. 4403) would clarify FDCPA coverage for debt buyers after the Supreme Court’s decision in Henson v. Santander Consumer USA, Inc. and clarify coverage for certain debts owed to the federal government that are currently collected by private debt collectors.
The National Consumer Law Center has additional resources regarding debt collection and the debt collection rulemaking at the CFPB, including extensive comments on the CFPB proposed rule, fact sheets, and infographics regarding how military families and veterans, older consumers, people of color, and students are affected by debt collection.
In the Wake of HUD Major Policy Change on Non-Borrowing Spouses, National Consumer Law Center Attorney to Testify on September 25 before U.S. House on Risks to Elders from Reverse Mortgage Abuses
FOR IMMEDIATE RELEASE: September 24, 2019
National Consumer Law Center contact: Jan Kruse, jkruse@nclc.org or (617) 542-8010
National Consumer Law Center attorney Sarah Bolling Mancini’s full testimony will be available by 2 pm ET on September 25 at: http://bit.ly/testimony-mancini
Washington, D.C.- National Consumer Law Center attorney Sarah Bolling Mancini will testify on Wednesday, September 25 at 2pm E.T. before the U.S. House Financial Services Committee Housing, Community Development, and Insurance Subcommittee at a hearing entitled “Protecting Seniors: A Review of the FHA’s Home Equity Conversion Mortgage (HECM) Program.”
The hearing follows a major policy shift by HUD announced on Monday aimed at helping widows and widowers remain in their homes after the death of a spouse who had taken out a reverse mortgage on the home. These so-called non-borrowing spouses had been blocked from a foreclosure deferral program by unworkable deadlines. Mancini will testify about the importance of this announcement from HUD, which will benefit many vulnerable surviving spouses. Mancini will also highlight the challenges that remain.
“The reverse mortgage foreclosure crisis we are facing was caused by problematic origination practices that largely predated 2015,” says National Consumer Law Center attorney Sarah Bolling Mancini. “Yet, nearly 90,000 HECM mortgage loans are at risk of foreclosure and if changes are not implemented, those older borrowers could soon be evicted and homeless.”
Mancini will testify that, although reverse mortgages play an important role as a safety net for older adults, many reverse mortgage borrowers, especially in communities of color, are losing their homes to foreclosure due to mortgage servicing and oversight failures, and reforms are needed. According to the U.S. Department of Housing and Urban Development (HUD) data, nearly 90,000 reverse mortgage loans are at risk of foreclosure due to a default on the obligation to pay property taxes and homeowner’s insurance. HUD auditors project that 18% of existing HECM reverse mortgages will eventually go into default on property charges. Even when comparing only lower income areas, reverse mortgage foreclosure rates are six times higher in predominantly African American neighborhoods than in majority white ones, according to a 2019 investigation by USA Today.
With 80% of those aged 65 or older owning their own homes, it is critical that HUD make reforms to allow older consumers to age in place with stable housing. NCLC makes the following recommendations, explained in more detail during Mancini’s testimony:
- Make loss mitigation mandatory for new HECMs that go into default on property charges;
- Expand loss mitigation options for existing HECMs and provide for a clear extension of foreclosure deadlines while servicers evaluate loss mitigation;
- Expand the Mortgagee Optional Election (MOE) Assignment program to cover situations where the borrower moves out of the home for health reasons;
- Clarify the procedures for post-2014 non-borrowing spouses entering a deferral period after the death of the borrower; and
- Improve servicer communications with borrowers.
Related Resources
Consumer Advocates Applaud U.S. House for Passage of Bill that Would Restore American Families’ Right to Their Day in Court
FOR IMMEDIATE RELEASE: September 20, 2019
National Consumer Law Center Contacts: Lauren Saunders (lsaunders@nclc.org) or (202) 595-7845; Jan Kruse (jkruse@nclc.org) or (617) 542-8010
Washington, D.C. – Today, the U.S. House of Representatives took a big step forward in restoring justice for American families by passing the Forced Arbitration Injustice Repeal Act (H.R. 1423), which would allow regular Americans the right to take a dispute with a company to court.
“Forced arbitration clauses give companies who break the law a get-out-of-jail free card,” said National Consumer Law Center Associate Director Lauren Saunders. “Representative Hank Johnson, who sponsored the bill, along with members of the House who voted to pass the FAIR Act, have demonstrated that they stand with American families to defend the constitutional right to their day in court.
Senator Richard Blumenthal has sponsored an identical bill in the U.S. Senate (S 610). “Our U.S. Senators should move forward to pass this legislation and demonstrate that they side with ordinary people instead of large corporations by banning the secretive, biased system of forced arbitration,” added Saunders.
Wall Street corporations, like Equifax and Wells Fargo, cell and internet phone companies, nursing homes, predatory for-profit colleges, and employers that engage in sexual harassment all use forced arbitration to evade accountability and keep their wrongdoing behind closed doors. “Forced arbitration clauses that are buried in fine print take away our Seventh Amendment right to access the courts when companies violate the law,” explained Saunders. “Instead of a judge, a private arbitrator, often chosen and paid by the company, decides cases in a secretive proceeding with no appeal, and forced arbitration often prevents people from joining together to fight widespread wrongdoing.”
Credit Union Regulator Expands High-Cost Loan Program Without Needed Safeguards, Say Consumer Groups
For Immediate Release: September 19, 2019
Contacts:
National Consumer Law Center: Jan Kruse jkruse@nclc.org
Center for Responsible Lending: Matthew Kravitz matthew.kravitz@
NCUA votes for changes to Payday Alternative Loan program; while addressing some key concerns of community groups, overall the vote is a step in the wrong direction
WASHINGTON, D.C. – Today, the National Credit Union Administration (NCUA) voted to approve a final rule governing Payday Alternative Loans, referred to as PAL II. In response, the Center for Responsible Lending (CRL) and the National Consumer Law Center (NCLC) acknowledged improvements over the proposed PAL II rule while critiquing changes that could expose credit union members to more loans with effective annual percentage rates (APRs) above 100% and to larger loans at rates that could be unaffordable.
CRL and NCLC (on behalf of its low-income clients) had submitted a comment letter on the proposed rule. This and a separate letter from more than a hundred organizations, including community, consumer, civil rights, faith, and legal services groups, urged the NCUA to maintain guardrails against predatory lending.
“The mission of Payday Alternative Loans is to help financially distressed credit union members, so strong safeguards are needed to prevent PAL from pulling these economically vulnerable members deep into debt. The NCUA Board today missed an opportunity to buttress its consumer protections and instead weakened them,” said Mike Calhoun, President of the Center for Responsible Lending. “Specifically, the NCUA missed the opportunity to explicitly require that credit unions verify that members can repay these loans, considering both income and expenses. Add to this today’s vote to expand the maximum loan size from $1,000 to $2,000 for PAL loans – which are already allowed at rates higher than typical credit union loans – and some people may be pushed into a dangerous cycle of re-borrowing substantial amounts of money. In other words, the result of this program change could be piling mountains of debt onto some already indebted, low-income credit union members. NCUA Member Todd Harper commendably opposed this harmful final rule while speaking to the need for reasonable costs and for larger loans taking into consideration borrowers’ ability to repay.” Calhoun added, “While the NCUA overall weakened consumer protections, the Board should be applauded for listening to a broad coalition of community groups in improving the initial proposal by maintaining existing limits on the number of PAL loans issued within a short time period.”
Lauren Saunders, Associate Director of the National Consumer Law Center said, “Credit unions serve their members with a range of loan products, the vast majority of which are outside the Payday Alternative Loan program and under the statutory interest rate cap of 18% APR. That makes today’s harmful changes especially disappointing, including the elimination of the minimum loan size of $200 and allowing higher rates on larger loans. But we are gratified that the NCUA did retain the limit on three loans in a six-month period, abandoning the original proposal to allow credit unions to engage in loan-flipping of very short-term loans the way payday lenders do.”
The NCUA provided a summary of the changes and additional information in this document on Payday Alternative Loans.
More than 200 Organizations across the 50 States and D.C. Call for Strong Consumer Protections on Debt Collection
For Immediate Release: September 19, 2019
Contacts:
National Consumer Law Center: Jan Kruse at jkruse@nclc.org
Americans for Financial Reform: Carter Dougherty at carter@ourfinancialsecurity.org
CFPB proposal would allow for more consumer abuse and harassment from debt collection industry
Washington, DC – Late yesterday, a coalition of 232 nonprofit organizations from all 50 states and the District of Columbia sent a letter to the Consumer Financial Protection Bureau (CFPB) in response to its proposal that protects abusive debt collectors more than consumers. Instead of giving the debt collection industry more weapons to harass and abuse consumers, the coalition urges the consumer bureau to limit the number of phone calls per week, require consent of the person before sending emails or text messages, allow people to opt-out of electronic messages, hold debt collection attorneys responsible for misrepresentations, and prohibit the collection of “zombie debt.” The National Consumer Law Center, Americans for Financial Reform, Consumer Federation of America, National Association of Consumer Advocates, U.S. PIRG, and Woodstock Institute also submitted technical comments (227 pages).
In May, the CFPB released its proposal to weaken major consumer protections established by the Fair Debt Collection Practices Act. Some of those proposals include:
- Allowing collectors to ring people 7 times per week per debt. For example, someone with 8 medical debts could hear the phone ringing 56 times a week;
- Authorizing collectors to send emails, texts, and private social media messages without consumer permission and with no set limits, and to send important information through hyperlinks;
- Allowing debt collectors to collect on “zombie debt” that is so old that the deadline for a lawsuit has passed and records of who owes the debt and for how much may be lost; and
- Protecting attorneys who file baseless lawsuits against the wrong consumer or for the wrong amount without verifying account documents.
“The CFPB’s proposal greenlights collection of old debts past the legal deadline to sue, misrepresentations by collection attorneys, harassment and privacy violations by phone, email and text, and even security risks by requiring people to click on hyperlinks to get required information about a debt and their rights. The current consumer bureau proposal is a gift to abusive debt collectors and the final rule must include much stronger protections for consumers,” said Lauren Saunders, associate director at the National Consumer Law Center.
“This proposal does not come anywhere near protecting consumers from predatory debt collectors. In fact, it allows the debt collection industry to abuse and harass consumers more than is currently allowed,” said Linda Jun, senior policy counsel for Americans for Financial Reform Education Fund. “This proposal follows a consistent trend, set by the CFPB and its director Kathy Kraninger, of turning its back to consumers every step of the way.”
“The CFPB’s debt collection spam plan is incredibly unpopular, likely illegal, and payback for the over $340,000 the debt industry funneled into Republican campaigns including Donald Trump’s,” said Jeremy Funk, spokesperson for Allied Progress. “When Director Kraninger decided to grant the industry’s wish for more options to harass consumers, did she ever wonder, ‘Would I mind getting never-ending texts from strangers asking for money?’”
“The CFPB has fumbled its opportunity to issue a proposal that will protect consumers from the worst misconduct in the debt collection market where abuse runs rampant,” said Christine Hines, legislative director at the National Association of Consumer Advocates. “Our only hope is that the bureau will heed the advice and feedback from stakeholders, particularly consumer advocates and consumers themselves, to ensure a final rule that will strengthen existing safeguards instead of weakening them.”
“This proposal is yet another step backward for a CFPB that is determined to ignore its mission to protect consumers. Consumers deserve clarity and compassion when it comes to debt collection not misinformation and harassment,” said Leandra English, director of financial services advocacy and outreach at Consumer Federation of America.
NCLC Attorney Statement Regarding Challenge to Constitutionality of Consumer Financial Protection Bureau Leadership Structure
FOR IMMEDIATE RELEASE: September 18, 2019
National Consumer Law Center contacts: Lauren Saunders (lsaunders@nclc.org) or (202) 595-7845; Jan Kruse (jkruse@nclc.org) or (617) 542-8010
Washington, D.C. – Late yesterday, the Consumer Financial Protection Bureau joined an appeal by the Trump Administration to the U.S. Supreme Court asserting that the agency’s independent leadership structure is a violation of the U.S. Constitution’s separation of powers.The 9th Circuit case is Seila Law LLC v. CFPB. The National Consumer Law Center, Public Citizen, and other public interest groups laid out the arguments for why the separation of powers principles support the CFPB leadership stucture’s constitutionality in amicus briefs filed in similar cases pending in the D.C. Circuit (March 2017), the 5th Circuit (September 2018) and the 2nd Circuit Courts of Appeal (March 2019).
The following is a statement by National Consumer Law Center Associate Director Lauren Saunders.
“More than 80 years ago in the Humphrey’s Executor v United States case involving the FTC, the Supreme Court upheld Congress’s authority to create independent agencies and to limit the president’s ability to dismiss officers for political reasons without cause. The situation today is no different than when President Roosevelt tried to stack the FTC.
“It is shocking to see the head of a consumer protection agency who took the job with eyes open about the baseless claims against the agency suddenly reverse course and decide to undermine her own authority to protect the public. Most courts have rejected the claim that Congress cannot protect an agency from political meddling without cause and we expect the Supreme Court to do so as well.”