Research

On March 1, 2005, the FDIC announced revisions to its guidelines to banks engaged in payday lending. The guidelines seek to "ensure that this high-cost, short-term credit product is not provided repeatedly to customers with longer-term credit needs." Thus, the FDIC has taken the important step of recognizing that payday lending can lead to a debt-trap. The guidelines call on banks to develop procedures to ensure that they do not make payday loans to customers who have had payday loans outstanding from any lender for a total of more than three months in the previous 12 months. Assuming a...

Prepayment Penalties Impact Minority Neighborhoods Click here to visit our tutorial, which walks you through a Truth in Lending disclosure form, and educate yourself. For years, subprime lenders have defended prepayment penalties by claiming that borrowers with penalties get a lower interest rate. Now, groundbreaking research by CRL shows that borrowers get no rate benefits with subprime prepayment penalties -- and that residents in minority neighborhoods have much greater odds of receiving such penalties. Prepayment penalties (fees for paying off mortgage loans early) are almost nonexistent...

Prepayment Penalties Impact Minority Neighborhoods Click here to visit our tutorial, which walks you through a Truth in Lending disclosure form, and educate yourself. For years, subprime lenders have defended prepayment penalties by claiming that borrowers with penalties get a lower interest rate. Now, groundbreaking research by CRL shows that borrowers get no rate benefits with subprime prepayment penalties -- and that residents in minority neighborhoods have much greater odds of receiving such penalties. Prepayment penalties (fees for paying off mortgage loans early) are almost nonexistent...

PAYDAY LENDERS OFFER DEFECTIVE PRODUCT, CLAIMING IT FILLS NEED FOR ACCESS TO CREDIT Predatory payday loans: trap borrowers in high-cost debt drain income and damage credit could be offered on HBCU campuses under new agreements Defenders of the payday lending industry use the term "access to credit" to make the argument that payday loans provide communities of color with financial services that have historically been denied them. But payday lending is a faulty form of credit and a poor substitute for fair and responsible financial services. Rather than help borrowers through financial...

OVERDRAFT LOAN = HIGH-COST NO-CHOICE CREDIT Protection? More like small loans with abusive terms. Banks and credit unions now enroll many of their account holders into the most expensive option for covering overdrafts—an option customers generally don't want and didn't ask for—and leave them without the information they need to protect their funds. Under these systems, financial institutions routinely approve uncovered transactions without warning their customers of a deficit in their accounts, and charge an average $34 fee for each incident, even when the uncovered purchase amounts to just a...

This brochure was developed and published by the South Carolina Appleseed Legal Justice Center. What is an Auto Title Loan? An Auto Title Loan is a short-term loan, usually no longer than 30 days. Your car title is used to secure the loan. This means if the loan is not repaid, the lender may take the car and sell it to get the loan money back. Most title lenders will only make the loan if you do not owe anything else on the car. Who are Auto Title Lenders? Auto Title Lenders often target people with bad credit, low-income individuals, military members, and elderly people. The lenders make...

EACH YEAR, PREPAYMENT PENALTIES IN SUBPRIME LOANS CAUSE 850,000 FAMILIES TO LOSE $2.3 BILLION IN HOME EQUITY WEALTH. The Penalty for Improved Credit Consider this typical scenario: An African-American family gets a subprime mortgage loan for $150,000 with a 12% interest rate. After making timely payments for three years, they realize they can qualify for a better loan. However, when the family tries to refinance, they discover their existing loan comes with a hefty prepayment penalty -- adding up to 5% of their loan balance, or about $7,500*. The family is forced to choose between paying the...

Overdraft loan programs (also called "bounced-check protection" or "courtesy overdraft protection") allow customers to incur debt when their checking account goes into a negative balance. Borrowers are charged a flat-fee per check or non-check overdraft and must bring their account to a positive balance within a short time period. The institutions that operate the programs do not disclose an annual percentage rate (APR) because they insist that overdraft loans are not covered by the Truth in Lending Act (TILA).

Wall Street analysts praise Wells Fargo's revenue and sales growth, diversification, distribution/marketing prowess, and standout risk management. Despite Wells Fargo's success, there appear to be serious trouble spots in its subprime mortgage lending, particularly the predatory practices of Wells Fargo Financial (WFF) that victimize low-wealth consumers. While these practices have been criticized by community groups since the mid-1990s, they apparently have been tolerated by Wells Fargo management because of the unit's profitability.

This report argues that North Carolina payday lenders make their profit on two key principles: 1) circumvent the North Carolina law by using federal law, and 2) utilize a business model that depends on borrowers paying more in fees than borrowing in principal.