CRL in the News
With deceitful practices like opening unauthorized bank accounts, reordering debit card transitions to maximize overdraft fees and forced arbitrations clauses, what we need now more than ever are safeguards in place that stop banks from taking advantage of those who entrust banks with their hard-earned money. The OCC announcement to roll back the bank payday guidance moves us backward instead of forward.
On the other side, Center for Responsible Lending Senior Policy Counsel Melissa Stegman said, “President Trump just handed a get-out-of-jail-free card to financial fraudsters. This unjust law enables companies to block group lawsuits by consumers, thus removing an indispensable check on corporate misconduct. Instead, this law lets companies force consumers into a secret arbitration system rigged against them – discouraging claims and allowing companies like Wells Fargo and Equifax to hide widespread consumer abuse,” said Stegman.
If the CFPB’s rules had gone into effect, companies like Wells Fargo, JPMorgan Chase, Citigroup and Equifax would have been exposed to billions of dollars in lawsuits for future bad behavior. The Center for Responsible Lending estimates the U.S. banking customers paid $14 billion dollars in overdraft fee last year, and the industry has gotten in trouble in the past for shady tactics like transaction reordering, where a bank would reorder a day’s debits and withdrawals to extract the most overdraft fee income from its customers that day.
"Senators who voted in favor of this resolution just handed a gift to bad financial actors," said Melissa Stegman, senior policy counsel at the Center for Responsible Lending. "Companies, like Wells Fargo and Equifax, frequently bury forced arbitration clauses in the fine print of agreements, giving them the ability to cheat consumers with impunity. These rip-off clauses deny Americans the freedom to seek justice through our court system – a right embodied by the Constitution's Seventh Amendment."
“Companies, like Wells Fargo and Equifax, frequently bury forced arbitration clauses in the fine print of agreements, giving them the ability to cheat consumers with impunity,” said Melissa Stegman, Center for Responsible Lending senior policy counsel. “These rip-off clauses deny Americans the freedom to seek justice through our court system – a right embodied by the Constitution's Seventh Amendment.”
“These are exploding loans that are really causing a lot of damage,” Michael Calhoun of the Center for Responsible Lending. Michael Calhoun with the Center for Responsible lending says the loans target people with poor credit and snare them in an endless cycle of interest payments.
“Subterfuge is as core to the payday lenders’ business model as is trapping borrowers in a cycle of debt,” said Diane Standaert, director of state policy at the Center for Responsible Lending. In late September, American Banker sent screenshots of payday ads found on Google to the Mountain View, Calif.-based company. After an internal review, a Google spokeswoman said that the ads in question violated the company’s policy.
Mike Calhoun, the president of the Center for Responsible Lending, said he was skeptical of claims that regulations stifle the economy, pointing to high profits and substantial share buybacks by banks as evidence that the institutions are “awash in cash these days.”
The new rules proposed by the Consumer Finance Protection Bureau are expected to require lenders to verify key information from prospective borrowers, such as their income, borrowing history and whether they can afford the loan payments. The bureau released a draft of the rules last year for comment and is expected to release the final version this month.
“Payday lenders depend on keeping people trapped in loans charging 400 percent interest. Congress just voted to give payday lenders a free pass, showing how out of touch they are with their constituents,” Center for Responsible Lending executive vice president Diane Standaert said. “This vote came despite the fact that 73 percent of likely voters support protections against the harm of the payday debt trap. While these Congress members are failing their constituents, the Consumer Financial Protection Bureau is working to stop the harmful debt trap of payday loans.”