Consumers are increasingly accessing small short-term loans through digital cash advance and Earned Wage Advance (EWA) online applications. Consumers can receive advance amounts up to $750 per pay period while using these apps. Some companies contract with employers to provide this product while others work directly with consumers. In the direct-to-consumer model, the advances are often marketed as “free,” but providers require a variety of fees to expedite the advance and employ pressure tactics allowing them to collect fees in the form of “tips”. These fees make advances very costly for...
Payday, car-title, and similar high-cost loans, typically with interest rates of 100% APR and higher, trap people in crippling long-term debt. CRL advocates for regulators to require lenders to verify borrowers can afford to repay a loan before that loan is issued. CRL also advocates for interest rate caps of no higher than 36% APR and for enforcement of current usury laws.
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Millions of Americans continue to experience financial precarity, and this report illustrates how payday and car-title lending extract financial resources from communities across the United States.
Payday lenders charge exorbitant fees to borrowers without assessing their ability to repay, and the annual interest rates on these loans are in the triple digits.
The undersigned organizations commend the Department of Financial Protection and Innovation (DFPI) for moving to regulate abusive fintech lenders, including earned wage advance providers. We are very pleased to support the proposed rules and encourage the DFPI to vigorously enforce them to ensure that California’s most vulnerable consumers are not harmed. Signatories California Employment Lawyers Association (CELA) CA Labor Federation CA League of United Latin American Citizens (CA LULAC) California Low-Income Consumer Coalition (CLICC) California Reinvestment Coalition (CRC) Center for...
The Center for Responsible Lending (CRL) and the National Consumer Law Center (NCLC) expressed support for the Department of Financial Protection and Innovation’s (DFPI) proposal to clarify that fintech cash advances are covered by the California Financing Law (CFL), including its fee and interest rate limits. The proposal requires that lenders be licensed under the CFL, with a temporary licensing exception for employer-based advances by firms that register under the California Consumer Financial Protection Law.
Opportunity Financial, also known as OppFi, is a consumer lending company based in Chicago, Illinois that offers personal installment loans. Their marketing suggests they are providing an essential service to the credit and income constrained; their products, however, carry triple-digit Annual Percentage Rates (APRs). Public filings reveal a business model built around high levels of delinquency and default . According to its website, OppFi’s stated mission is to “empower everyday consumers to rebuild their financial health," but the company is a legacy subprime lender. OppFi uses a rent-a...
Opportunity Financial, also known as OppFi, is a consumer lending company based in Chicago, Illinois that offers personal installment loans. Although OppFi’s stated mission is to “empower everyday consumers to rebuild their financial health,” OppFi is a legacy subprime lender. The company uses a rent-a-bank scheme to evade consumer protections and charge customers triple-digit interest rates on its personal installment loan product. In a rent-a-bank scheme, a lender partners with an out-of-state bank. The lender uses that bank’s charter to make loans at rates up to five times greater than the...
Coalition Comments to FDIC Regarding Community Reinvestment Act Examination of First Electronic Bank
Accountable.US, Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Federation of America, National Consumer Law Center (on behalf of its low- income clients), National Community Reinvestment Coalition, Public Citizen, US PIRG and the Woodstock Institute submitted comments for the Community Reinvestment Act (CRA) examination of First Electronic Bank. First Electronic Bank helps at least two nonbank lenders make predatory loans at rates up to 180% annual percentage rate (APR) that they cannot legally make directly. The loans that First Electronic Bank...
Earned or Early Wage Advance (EWA) products offer workers access to their wages before payday, usually for a fee. While low-wage workers can benefit from EWA programs that are properly designed and regulated, they can instead be harmed when products are allowed into the marketplace without guardrails keeping their use and cost within reasonable bounds. States should regulate all EWA products as credit and require compliance with consumer protections that prevent predatory lending debt traps commonly associated with payday loans. Download to continue reading