Research

A report released by the Tennessee Department of Financial Institutions on February 1, 2006 reveals that Tennessee's title lending industry has taken thousands of borrowers' cars after charging borrowers sky-high rates. Findings from the report include the following: High Rates. Some Tennessee lenders charged as much as 30% per month for title loans, substantially more than the 22% per month allowed by Tennessee law. Most other title lenders charged 22% per month, which is 264% APR. (page 6) Illegal fees. Over one quarter of the title lenders surveyed charged illegal fees, in addition to the...

With huge profits at stake, the payday lending industry is fighting reform efforts by positioning itself as "consumer friendly," misrepresenting the facts, and circumventing state laws. Claim 1: Payday loans provide needed emergency credit. Claim 2: Payday lenders serve the working middle class. Claim 3: Customers understand the cost of this service. Claim 4: Payday loans are cheaper than other alternatives. Claim 5: Fees are high because these loans are risky. Claim 6: Most consumers use payday loans responsibly. Claim 7: Consumers oppose any limits on payday lending. Claim 8: The payday...

A Georgia statute passed in May 2004 imposes stiff penalties for payday lending by non-banks and in-state banks, and is the first state law to expressly prohibit payday lenders from contriving with out-of-state banks to evade state usury limits. Soon after its enactment, several payday lenders and their bank "partners" sued the state seeking a court ruling that the Act was unconstitutional. The effort failed. The Georgia Act is a good example of state legislation against abusive lending practices and lender contrivances to circumvent state law.

African-Americansand Latinos get high-priced subprimemortgages far more frequently than whites -- even when they are equally qualified, according to a groundbreaking new study from CRL. Lenders say they charge more because African-Americans and Latinos on average have shakier credit histories, which makes lending to them riskier. But that explanation is simply wrong. In the most extensive study of its kind, CRL found that African-Americans and Latinos are commonly almost a third more likely to get a high-priced loan than white borrowers with the same credit scores. The study examined 50,000...

VULNERABLE CONSUMERS CAUGHT IN OVERDRAFT CYCLE CRL has conducted a survey of overdraft loan customers. Our findings suggest that: * Sixteen percent of overdraft loan users account for 71 percent of fee-based overdraft loan fees. *Repeat users are more often low-income, single, non-white renters. * Repeat users are in effect using the overdraft loans as an expensive substitute for a line-of-credit, and are paying fees that can be as costly as payday loans.

The Center for Responsible Lending has released the most comprehensive study ever conducted on state laws aimed against predatory lending. "The Best Value in the Subprime Market: State Predatory Lending Reforms" shows that state laws are working well for credit-strapped families in the subprime market and for responsible lenders. With strong state laws, homeowners get these advantages: Stronger protections with plenty of access to home loans Interest rates that are no different, or even lower, than rates in states that lack strong anti-predatory lending laws More responsible loans in a growing...

In a new working paper "Call Protection in Mortgage Contracts" Michael LaCour-Little concludes that prepayment penalties reduce the cost of credit to borrowers. However, there are several shortcomings in his analysis: inadequate data, inconsistent results, and neglect of the negative effects of prepayment penalties.

To find a model for national legislation, many lawmakers need look no further than their own backyards. People who live in states with strong laws against predatory lending are more likely to get responsible mortgages at a lower cost. Our findings show that state laws enacted to prevent predatory mortgage lending work as intended to reduce abusive loan terms without impeding credit. Strong state laws have been good for consumers while supporting a thriving subprime lending market. They provide credit-strapped families with plenty of access to responsible home loans at typical -- or even lower...

This report is the first systematic investigation of the nature and extent of predatory lending in Maine. Based on research conducted during July and August 2005, we examine Maine's subprime mortgage market and determine the extent and impact of predatory lending in the state between 2000 and 2005. In this research we draw on a number of sources, including available empirical data on the subprime market, publicly available foreclosure records and lien histories, and interviews with various stakeholders and borrowers. In addition, we review the relevant laws and regulations in Maine's Consumer...

Public Chapter 440 of the Acts of 2005 significantly amends the Tennessee Title Pledge Act ("Act"), set forth in Title 45, Chapter 15, regarding the operation and regulation of the title pledge industry. Specifically, Public Chapter 440 subjects the title pledge industry to licensing and examination by the Department of Financial Institutions ("Department"). Read CRL's summary of the report >