CRL in the News
The biggest negative with car title loans are the sky-high interest these lenders charge. According to the Federal Trade Commission, title loans typically carry an annual percentage rate of 300%. A report by the Center for Responsible Lending in 2013 summed it up this way: If you borrowed $1,000 for a month from a title lender, you'd typically pay $250 in interest. That is exorbitant.
“People are increasingly missing payments within the first six months of taking out their auto loans, which is a telltale sign that loans are being made that are clearly unaffordable,” Chris Kukla, senior vice president of the nonpartisan Center for Responsible Lending, told Salon.
The banks’ practice involves processing the largest charges received first, rather than in chronological order. That “empties bank accounts faster,” said Michael Calhoun, president of the Center for Responsible Lending, a watchdog group that’s called on federal regulators to end the practice known as high-to-low posting.
Graciela Aponte-Diaz, a policy director for the Center for Responsible Lending, says low-income families, who may not have a bank account, often use prepaid cards. But the cards can come with hidden fees, something that will change with the new “know as you go” provision.
Consumer groups are praising the new rules on prepaid credit cards just released by the federal Consumer Financial Protection Bureau. The regulation goes into effect next fall and will make prepaid card issuers follow many of the same rules that apply to credit cards. Graciela Aponte-Diaz, a policy director for the Center for Responsible Lending, says low-income families, who may not have a bank account, often use prepaid cards.
Car-title loans provide a percentage of a vehicle’s total value in exchange for the promise of quick cash. Unfortunately, when car titles are used as collateral for one of the most predatory and high-cost consumer loans, another cycle of debt can begin. The typical car-title loan is refinanced eight times and comes with triple-digit interest rates as high as 300 percent. Each year, car-title loans strip $4 billion in fees from consumers. The looming threat of repossession, which affects one in five consumers, often prompts these costly renewals.
Then the Department of Education decided that ITT was no longer a qualifying institution for students receiving federal loans. “Obviously it’s a system failure of accreditation.” Whitney Barkley from the Center for Responsible Lending says students in for-profit schools have been left in the lurch when officials fail to act in a corrective and timely way. “It’s obviously a system failure of states who too often just accept that accreditation and allow the school to operate in their state without doing much more to approve them or oversee them.
On the surface, you'd expect consumer activists would be lining up with the CFPB. Not so. While it's getting applause for recommending some changes, there's also pushback from groups that want more aggressive regulations, including those seeking to lay the groundwork for capping interest rates on payday loans. "The CFPB recommendations are a step in the right direction, but they don't go far enough," said Mike Calhoun, president of the Center for Responsible Lending, based in Durham, N.C.
Consumer advocates, including the Center for Responsible Lending, opposes giving Congress authority over the CFPB’s budget. The group’s president, Mike Calhoun, said in an interview that doing so would mean a company being investigated by the bureau could go to friends in Congress to prohibit funds from being used for the probe. Congress could scuttle the agency by simply refusing to appoint commissioners to oversee it.
The Rev. Sekinah Hamlin, who leads faith initiatives for the Center for Responsible Lending, says that faith leaders have mobilized, because they expect that the payday lending industry will fight any regulations to curtail their activity. The CFPB will be accepting comments about payday lending until Oct. 7, and the Center for Responsible Lending hopes that people will share letters and comments encouraging CFPB to curtail predatory payday lending.