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NCLC in the News

Select media clips. Journalists interested in speaking with an expert at the National Consumer Law Center should contact Jan Kruse (This email address is being protected from spambots. You need JavaScript enabled to view it. or 617.542,8010).

Press Releases

With New OCC Guidance, Banks Must Ensure Small-Dollar Loans are Affordable

FOR IMMEDIATE RELEASE: May 23, 2018 || Contacts: Lauren Saunders (This email address is being protected from spambots. You need JavaScript enabled to view it.) or (202) 595-7852; Stephen Rouzer (This email address is being protected from spambots. You need JavaScript enabled to view it.) or (202) 595-7847

WASHINGTON – In reaction to a new Bulletin from the Office of the Comptroller of the Currency (OCC) that encourages banks to offer small-dollar loans, advocates at the National Consumer Law Center emphasized that banks must make affordable loans of 36% or less and stay away from rent-a-bank payday loans.

“The OCC bulletin appropriately emphasizes the importance of determining a borrower’s ability to repay, along with reasonable and transparent pricing and terms that do not result in costs disproportionate to the amount borrowed. But banks must go farther and limit the loans to 36% APR or less to avoid high-cost debt-trap lending,” said Lauren Saunders, associate director of the National Consumer Law Center. “The 36% interest rate cap has a long history going back over 100 years, widespread public support, and increasing acceptance as the dividing line between predatory and mainstream small-dollar loans. Higher interest rates encourage misaligned incentives, with lenders profiting while consumers default.”

The bulletin advises national banks to use internal and external sources to assess creditworthiness and “sound underwriting for credit offered to consumers who have the ability to repay but who do not meet traditional standards.” “Assessing ability to repay by looking at both income and expenses is a cornerstone of responsible lending,” Saunders explained.

While the bulletin only applies to loans over 45 days in length that are outside the Consumer Financial Protection Bureau’s payday loan rules, Saunders noted: “The admonition to ‘avoid continuous cycles of debt and costs disproportionate to the amounts borrowed’ should be taken as condemnation of the costly bank payday loans that several national banks offered in the past and must continue to avoid.” Last fall, the OCC rescinded 2013 guidance about bank payday loans, aka “deposit advance products,” but numerous groups wrote an open letter to banks urging them not to re-enter that market.

Saunders praised the warning that the OCC “views unfavorably” banks that partner with payday lenders and other entities to help them evade state interest rate limits that apply to nonbank entities but not to banks. “Since 2003, national banks, which are regulated by the OCC, have stayed out of rent-a-bank lending, and this bulletin is a signal that it must stay that way,” Saunders explained. But high-cost lenders have been using rent-a-bank partnerships with FDIC-supervised banks to avoid state interest rate limits, and Saunders called on the FDIC to stop those abusive arrangements.

“We welcome banks into the small-dollar loan market as long as they offer affordable and responsible loans at 36% or less,” Saunders added. “With their existing infrastructure and knowledge of their customers, banks are well positioned to offer affordable small-dollar loans as a service to their customers that enhances a broader relationship.”

The OCC bulletin follows a letter earlier this month that several national civil rights, faith, and consumer groups wrote to the OCC and other federal regulators urging them to prevent high-cost, usurious loans by banks and credit unions in any form, short- or long-term and whether made directly or through partnerships with non-bank lenders.

Additional Resources:

• Report: Misaligned Incentives: Why High-Rate Installment Lenders Want Borrowers Who Will Default, 2016
Guidelines for Affordable Small Dollar Loans, 2014
• Report: Why 36%? The History, Use, and Purpose of the 36% Interest Rate Cap, 2013
Learn more about NCLC’s body of work on high-cost short-term loans.

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New Law Allows Mortgage Lenders to Resume Risky Loans, Hide Discrimination and Engage in Rural Lending Abuses

FOR IMMEDIATE RELEASE: May 23, 2018 || Contacts: Alys Cohen (This email address is being protected from spambots. You need JavaScript enabled to view it.) or (202) 595-7852; Stephen Rouzer (This email address is being protected from spambots. You need JavaScript enabled to view it.) or (202) 595-7847

WASHINGTON – Yesterday, the U.S. House of Representatives passed the Senate’s bill, S. 2155, the “Bank Lobbyist Act,” stripping consumers of key protections Congress enacted after the recent financial crisis that devastated communities and crashed the market. The White House issued a Statement of Administrative Policy in support of the bill. The new law rolls back a range of housing and other protections, leaving homeowners more exposed to lending abuses.

“We need a market that works for all borrowers, not a widening of the wealth and fairness gap,” said Alys Cohen, staff attorney in the Washington office of the National Consumer Law Center. “In the guise of relief for small banks, Congress has voted to make it easier to hide information on lending discrimination, to make unaffordable mortgage loans, and to expose rural homeowners to abusive and overpriced loans.”

S. 2155 will enable home lending abuses such as:

  • Engaging in race discrimination in mortgage lending without reporting key loan characteristics to regulators for oversight;
  • Offering risky adjustable rate mortgages without proper affordability reviews;
  • Steering manufactured home borrowers into overpriced loans;
  • Making higher-priced mortgage loans to borrowers without an escrow account to shield against payment shock at tax time; and
  • Lending in rural areas without a reasonable property valuation.
The bill contains some modest protections related to credit reporting, such as free credit freezes, but preempts state freeze laws that apply to insurance and employment usage and prevents states from adopting stronger measures. The bill also forces Fannie Mae and Freddie Mac to start over on a process to update their credit scoring models, wasting years of work and delaying an already overdue effort. This provision is seen as a boon to VantageScore, which is a joint venture of the credit bureaus, including Equifax.

S. 2155 also purports to help student loan borrowers “rehabilitate” their private student loans. But in fact, it would allow collectors to use unspecified credit benefits as bait to lure unwitting borrowers into reviving ancient uncollectable debts.

The bill would also increase systemic risk to the entire economy by deregulating 25 of the 38 largest banks in the United States. “Can memories in Congress be this short that we want to again risk devastation for millions of American families?” Cohen asked.

The bill now advances to the President, who is expected to sign it.

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CFPB Payday Rule Survives Legislative Threat, Remains Intact For Now

FOR IMMEDIATE RELEASE: MAY 17, 2018 || Contacts: Lauren Saunders, This email address is being protected from spambots. You need JavaScript enabled to view it. or (202) 595-7845; Jan Kruse, This email address is being protected from spambots. You need JavaScript enabled to view it.; (617) 542-8010

Advocates urge consumer bureau to preserve and enforce the rule, protect consumers against payday lending debt trap

WASHINGTON, D.C. - Congressional Review Act (CRA) resolutions—S.J. Res 56 and H.J. Res 122—to repeal the Consumer Financial Protection Bureau’s (CFPB or consumer bureau) payday and car title lending rule will not advance in Congress, as their legislative clock has expired. The CFPB rule, finalized in October, establishes basic consumer protections on these 300% or more interest loans, including the common sense standard that lenders should have to verify a borrower’s ability to repay before making the loan. Consumer and civil rights advocates are urging the consumer bureau to keep intact the rule, which is set to go into effect summer 2019, and to fulfill the bureau’s responsibility to enforce the law.

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Financial Regulators Should Not Sanction High-Cost Unaffordable Loans

For Immediate Release: May 14, 2018  ||  Contact: This email address is being protected from spambots. You need JavaScript enabled to view it., 503-984-4020

As the OCC soon clarifies its position on small dollar loans, it should ensure loans are reasonably priced and based on account holders’ income and expenses

WASHINGTON, D.C. – The Center for Responsible Lending, Americans for Financial Reform, National Consumer Law Center (on behalf of its low income clients), U.S. PIRG, Missouri Faith Voices—a Federation of Faith in Action, Consumer Federation of America, UnidosUS, and NAACP sent a letter urging federal bank regulators to prevent high-cost loans by banks and credit unions—whether short-term, balloon payment payday loans (also known as “deposit advance” loans) or high-cost longer-term installment loans.

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Advocates Condemn Move by Consumer Bureau’s Mulvaney to Shutter Student Loan Division that Uncovered Major Abuses by Predatory Lenders

FOR IMMEDIATE RELEASE: MAY 9, 2018 || Contacts: Persis Yu (This email address is being protected from spambots. You need JavaScript enabled to view it.) or Jan Kruse (This email address is being protected from spambots. You need JavaScript enabled to view it.); (617) 542-8010

Boston – In an announcement today that he is closing the Consumer Financial Protection Bureau’s Office of Students and Young Consumers, Interim Director Mick Mulvaney has eliminated a key watchdog that has been working to protect 44 million student loan borrowers from rampant abuses by servicers, debt collectors, and predatory lenders.

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Congress Votes to Roll Back Consumer Bureau Effort to Thwart Auto Lending Discrimination

FOR IMMEDIATE RELEASE: May 8, 2018|| Contact: Jan Kruse (This email address is being protected from spambots. You need JavaScript enabled to view it.); (617) 542-8010

Boston – The U.S. House of Representatives today voted to repeal guidance issued in 2013 by the Consumer Financial Protection Bureau to help auto finance companies avoid racial and ethnic discrimination by holding them accountable to fair lending laws. “It’s outrageous that Congress voted to claw back this five-year old guidance intended to ensure our auto loan markets are free of racial discrimination,” said Stuart Rossman, director of litigation at the National Consumer Law Center. The auto finance market unfortunately has a demonstrated history of charging people of color more for their loans than the prices paid by white people with the same creditworthiness.”

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Illegal Kickback Scheme Nearly Doubles the Cost of Privatized Calls made by Prisoners in Massachusetts Corrections Facilities, Lawsuit Alleges

For Immediate Release: May 4, 2018 ||  Contacts

Download the complaint: http://bit.ly/comp-securus

Consumer and Prisoners’ Rights Groups Argue Agreement between Securus Technologies and the Bristol County Sheriff’s Office Harms Consumers, Should be Halted

Boston – An illegal kickback scheme between the Bristol County Sheriff’s Office (BCSO) in Massachusetts and Securus Technologies (Securus)—a company that operates privatized telephone systems in U.S. correctional facilities—is inflating the cost of calls and harming Massachusetts consumers, according to a lawsuit filed Wednesday afternoon.

Prisoners in Bristol County who want to communicate by phone with family, friends, and legal representatives have only one option available: they must use the privatized system operated by Securus. The cost of these calls is grossly inflated—approximately doubled—because Securus agreed to pay the BCSO illegal kickbacks in order to secure its exclusive phone service contract—and now passes along the costs of those payments to prisoners’ loved ones and attorneys.

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CFPB Should Not Weaken its Investigations of Wrongdoing

FOR IMMEDIATE RELEASE: APRIL 26, 2018 ||  Contacts 

Advocates Urge the Consumer Bureau to Retain a Robust Process to Investigate Potential Violations of the Law and Consumer Harm

WASHINGTON– More than 50 consumer, community, civil rights and legal services groups urged the Consumer Financial Protection Bureau (CFPB) to “retain broad, flexible and nimble authority to investigate potential violations of the law and consumer harm,” in comments submitted in response to the consumer bureau’s Request for Information (“RFI”) regarding Civil Investigative Demands and associated processes used to investigate wrongdoing.

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