CRL in the News

Durham, NC — Despite widespread opposition from advocates and state officials, the OCC issued a final rule today that would allow the banks they regulate to participate in “rent-a-bank” partnerships with predatory lenders, encouraging the return of 400% interest debt traps to North Carolina. After closing down illegally operating payday and car title lending in North Carolina in 2006, North Carolina saves some $457 million annually in fees that would otherwise be drained from those families with the fewest resources. Thirty-one North Carolina organizations joined a comment to the Office of the

The Trump administration has said that they’re seeking to expand opportunity and prosperity for African Americans, specifically by creating a “better climate for minority-owned businesses.” But their actions speak differently: The signature COVID-19 economic relief program for businesses—the Paycheck Protection Program—did not prioritize underserved markets, which negatively impacted thousands of Black-owned firms. In April, the Center for Responsible Lending said that approximately 95% of Black-owned businesses were shut out of COVID-19 relief loans. Today’s economic crisis is also seeing

“Supposedly there’s been a major recovery since the Great Recession, but communities of color haven’t recovered,” Ashley Harrington, the federal advocacy director and senior counsel at the Center for Responsible Lending, says. “They lost over a trillion dollars in wealth that has yet to be regained. We have been most impacted by every single pandemic and recession that has hit this country; and this pandemic, this recession is no different.”

“This bill is an inadequate response to our current economic fallout and public health crisis,” said Ashley Harrington, federal advocacy director and senior policy counsel with the Center for Responsible Lending. “More than five months have passed since Congress approved a substantive, bipartisan bill to help families stay afloat during this pandemic. Low-income families, particularly families of color who have yet to recover from the Great Recession, have been hit the hardest by this pandemic and the economic fallout. Without a comprehensive response, renters will continue to live with

While a lower required balance limit is good for some consumers, the net effect of the change will be for more of the cost of checking accounts — a free product for most customers — to be financed by the poorest customers, according to Rochelle Sparko, director of North Carolina policy at the Center for Responsible Lending. Those who will pay the service fee will also likely be the ones to pay overdraft fees as well. “People are not in a position to pay these excessive fees right now,” Sparko said. The pandemic has left millions unemployed or without regular work, and the changes could have an

The Center for Responsible Lending (CRL) calls the rule change an “end run,” allowing lenders to overcome state regulations that limit interest rates. Critics also call it a “rent-a-bank” scheme, since the bank of record has little involvement in the actual loan, though it may loan the money to the third-party lender, which in turn loans it to the consumer. “The OCC’s proposal provides that a bank ‘makes’ the loan and thus is the lender -- so that state interest rate laws do not apply -- so long as the bank’s name is on the loan agreement or the bank funds the loan,” CRL said in a statement.

A long list of worries weighs on us. Our health, our jobs, our children’s education. Are we in danger of foreclosure or eviction? What about racial disparities in policing and justice systems? While we are grappling with these tremendous challenges, federal regulators have something else on their minds: They are methodically easing the way for predatory lenders.

Research has shown that payday lending specifically targets Black communities. In 2005, The Center for Responsible Lending, a nonprofit group that promotes policies to curb predatory lending, found that African-American neighborhoods in North Carolina had three times as many payday loan stores per capita as white neighborhoods.

In the midst of the growing economic crisis, communities of color are hit disproportionately hard. These communities, particularly Black communities, are still recovering from previous disasters, like Hurricane Katrina and the 2008 foreclosure crisis. The health disparities that plague these communities coincide with the growing economic threat. Policymakers’ responses to COVID-19 must account for pervasive racial and economic inequality, and must prioritize protection from debt-related abuses.

The question of whether to allow tech companies to operate banks is a rare issue in which the banking industry is allied with consumer advocacy organizations. Consumer groups that have expressed concerns about the FDIC’s proposal include the Center for Responsible Lending, the National Consumer Law Center and the Woodstock Institute.