Research

CRL Response to “Reframing the Debate about Payday Lending by Liberty Street Economics” Research Comment On: "Do Defaults on Payday Loans Matter?" by Robert Mann Research Comment On: "Payday Loan Rollovers and Consumer Welfare" CRL Critique of “Payday Holiday: How Households Fare After Payday Credit Bans” by Donald P. Morgan and Michael R. Strain CRL Review of "Defining and Detecting Predatory Lending" by Donald P. Morgan, Federal Reserve Bank of NY, January 2007

A recent poll conducted by Lake Research Partners and Chesapeake Beach Consulting finds overwhelming bipartisan support for strong regulation of financial services and products in order to hold financial services companies accountable and protect consumers against unfair practices. By wide margins, Americans call for tough oversight and regulation of Wall Street banks, mortgage companies and credit card servicers, as well as specialized companies such as debt collectors, and they will vote these issues. Nearly six in ten voters express support for the work of the Consumer Financial Protection...

This paper analyzes California mortgage originations in the post-crisis period, from 2012–2014, using data collected under the Home Mortgage Disclosure Act (HMDA). Similar national analysis provides context for the state-wide observations. Analysis in four large California counties shows the variety of experiences across this large state. The main findings include: National and state-wide analysis reveal a reduction in mortgage credit for the loans that most clearly support homeownership overall. More loans that directly supported homeownership were made in 2000 than in 2014. Some borrowers...

The following blog post by Mike Calhoun and Sarah Wolff originally appeared on the Urban Institute’s Housing Policy Center: http://urbn.is/29rYamw Any housing finance system’s ability to provide broad access and affordability is predicated on two factors: how prices are set and, equally importantly, how costs are distributed. Price is important to focus on for many reasons; chief among them is because price is a barrier to accessing mortgage credit. One way to see this operating is to look at the difference between what kinds of loans the government-sponsored enterprises say they will purchase...

The Consumer Financial Protection Bureau (CFPB) has proposed a new national rule that addresses payday and car title lending. The proposal, as written, has some useful elements, but it is seriously undermined by several major loopholes. If the loopholes aren’t closed in the final version, the rule could essentially permit payday predators to conduct business as usual. What We Can Do There is still time to make the rule stronger. Call for a stronger rule by sending comments to the CFPB through October 7, 2016. We must continue to fight for rate caps in states, as rate caps are the single most...

A recent blog post by Liberty Street Economics, Reframing the Debate about Payday Lending, mischaracterizes the debate around payday lending and downplays the harms done to vulnerable consumers. Payday lenders and their allies have referenced the blog to justify their ongoing efforts to delay and weaken much needed regulation at both the state and federal level. The Center for Responsible Lending has taken a look at "Reframing" and issued a formal response. The primary issue with payday lending, and the one from which most of its other harms flow, is the intentional structuring of the payday...

Payday and car title loans are small-dollar, high-cost products that thrive on keeping consumers in a cycle of debt. With lenders doing essentially no underwriting, consumers find it easy to obtain these loans, often marketed as a solution to financial emergency. However, the unaffordability of the loan and the lenders extreme leverage over the borrowers – either through direct access to the bank account or threatening repossession of the borrower’s car - makes it very difficult to escape a cycle of debt that can last months, if not years. Debt trap products often lead to other financial harms...

An analysis of recently available data confirms that financial institutions continue to engage in abusive overdraft practices and that reform is urgently needed. This issue brief highlights five key concerns: Overdraft fees remain an enormous drain on checking account customers. Using newly available call report data as the starting point, we estimate that consumers pay nearly $14 billion annually in overdraft fees Research has consistently found that overdraft fees are disproportionately borne by a relatively small portion of account holders. Further, as an example from our data set of...

The Consumer Financial Protection Bureau (CFPB) is widely expected to soon propose a new national rule that addresses payday and car title lending. If strong enough, the rule has the potential to rein in the worst abuses of these kinds of high-cost loans, which carry triple-digit interest rates. Payday lenders are pushing for loopholes in the rule that would make it look like they were making changes but in fact would allow them to continue business as usual. What Products Will The Rule Cover? The CFPB’s 2015 preliminary outline offered a glimpse into what to expect from the proposed rule. The...

Payday and car-title loans typically carry annual percentage rates (APR) of at least 300%. These high-cost loans are marketed as quick solutions to a financial emergency. Research demonstrates, however, that they frequently lead to debt that is nearly impossible to escape. In addition, these loans are related to a cascade of other financial consequences, such as increased overdraft fees, delinquency on other bills, involuntary loss of bank accounts, and even bankruptcy. For car-title loans, the end result is too often the repossession of the borrower’s car, a critical asset for many people...