CRL in the News
“Payday loans are a debt trap by design and lead to cascade of other financial consequences such as increased overdraft fees and even bankruptcy,” the Center for Responsible Lending, a consumer group, said in a recent report.
Yesterday, Congresswoman Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, spoke at a press conference about the harms caused by predatory payday loans and the need for strong rules to protect victims from abusive practices. Waters spoke alongside advocates from consumer, civil rights and faith-based groups to urge the Consumer Financial Protection Bureau to finalize strong rules to rein in payday lenders, following a proposal the Bureau released earlier this month.
In a letter to Federal Housing Finance Agency Director Melvin Watt, a coalition of more than two dozen industry and consumer groups—including the Mortgage Bankers Association, Center for Responsible Lending, American Bankers Association, NAACP and National Association of Home Builders—called for the reduction or elimination of LLPAs charged by the GSEs, arguing that this risk is already being assumed by existing guaranty fees (g-fees).
Women of color are particularly vulnerable to predatory practices by subprime lenders, whether for home mortgages or short-term loans, according to the activists’ report issued Tuesday. They accuse the finance industry of “pink-lining,” a reference to the long-discredited practice by banks of “red-lining” black-majority neighborhoods.
The Center for Responsible Lending, among other groups, believes lenders should determine a borrower’s ability to repay any loan, and these loans should not be an exception, said Graciela Aponte-Diaz, the group’s policy director for California.
The American public has a very low opinion of payday lenders, says a new poll out from the NCLR Action Fund, Americans for Financial Reform, Center for Responsible Lending, and the NAACP. The poll, which comes on the heels of a proposed Consumer Financial Protection Bureau rule to reign in predatory lending, shows Americans see little value in the services payday lenders provide.
But Diane Standaert, director of state policy for the Center for Responsible Lending, said many payday borrowers turn to these less risky options only after they get in trouble with payday loans. "I think by the time people utilize their options, they're trying to get out of a very difficult situation from a loan that is essentially designed to be nearly impossible to escape," she said.
Fifteen states and D.C. currently ban the product outright or limit it to 36% APR or less. "But payday lenders are always trying to roll back these state interest rate limits," said Rebecca Borné, senior policy counsel at the Center for Responsible Lending.
"From a broad policy standpoint, looking at the economics of lending, there is a trade-off between interest rates and costs to have a profitable model," said Mike Calhoun, president of the Center for Responsible Lending, who cited the "congressional recognized standard" of 36% in the Military Lending Act. "High interest rates means a large percentage of your loans are unaffordable."
“At the heart of this proposed rule is the reasonable and widely accepted idea that payday and car title loans should be made based on the borrower’s actual ability to repay – while still meeting other basic living expenses,” Mike Calhoun, president of the Center for Responsible Lending, said of the new CFPB rule.