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Earned Wage Advance is Credit (In Focus Series #3)

Earned Wage Advance (EWA) providers market a means for workers to access their wages before payday, usually for a fee. In reality, there are two very different types of products that are marketed as EWA, one of which—sometimes called “faux EWA”— is simply a payday loan dressed up in “fintech” marketing. While low-wage workers can benefit from true EWA programs that are properly designed and regulated, they can instead be harmed when products are allowed into the marketplace without guardrails that keep their use and cost within reasonable bounds. States should regulate all EWA products as...

Comments to FDIC from Coalition on Community Reinvestment Act Examination of Rent-a-Bank FinWise Bank

From the comment: Accountable.US, Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Federation of America, National Consumer Law Center (on behalf of its lowincome clients), National Community Reinvestment Coalition, Public Citizen, US PIRG and the Woodstock Institute submit these comments in connection with the Community Reinvestment Act (CRA) examination of FinWise Bank. FinWise Bank helps several nonbank lenders make predatory loans at rates up to 160% annual percentage rate (APR) that they cannot legally make directly. The loans that FinWise...

Earned Wage Advance: States Should Regulate As Credit, Protect Consumers

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

CRL Testimony for "Consumer Financial Protection Bureau: Ripe for Reform" Hearing

The Center for Responsible Lending submitted a letter for the record on the House Committee on Financial Services’ Subcommittee on Financial Institutions and Monetary Policy hearing entitled, “Consumer Financial Protection Bureau: Ripe for Reform.” The letter details the importance of the CFPB and draws on new data from Republican polling firm Chesapeake Beach Consulting and Democratic firm Lake Research Partners shows that 79 percent of voters across the political spectrum – including 64 percent of independents and 75 percent of Republicans – overwhelmingly support the mission of the CFPB to...

Consumer and Civil Rights Groups Urge OCC to Reform Inequitable Overdraft Programs

The following organizations signed on to a letter to Michael Hsu, Acting Comptroller of the Office of the Comptroller of the Currency, urging him to act and ensure that OCC-supervised banks make necessary reforms to their inequitable overdraft programs. Accountable.US Americans for Financial Reform Education Fund California Reinvestment Coalition Center for Responsible Lending Consumer Action Consumer Federation of America Consumer Reports The Leadership Conference on Civil and Human Rights NAACP National Consumer Law Center (on behalf of its low-income clients) Revolving Door Project UnidosUS...

Payday Lending Supporters Promote Flawed Analysis to Justify Predatory Interest Rates

A report released in January of 2023 attempts to provide cover for the predatory practices of payday lenders, who charge average 400% annual interest on loans that routinely create a long-term cycle of debt that sends borrowers into deep financial insecurity. The Consumer Financial Protection Bureau (CFPB) found that 75% of payday lender fees are collected from borrowers with 10 or more loans per year, indicating the reliance of payday lenders on a business model of long-term debt. Eighteen states and D.C. have stopped this debt trap by implementing a rate cap of 36% or less, including fees...

CRL & NCLC Letter to the VA Regarding Loss-Mitigation Options for Guaranteed Loans

In response to the questions posed in the VA’s October 17, 2022 Advance Notice of Proposed Rulemaking, the National Consumer Law Center (on behalf of its low-income clients) and the Center for Responsible Lending urge VA to expand the opportunities available to help veteran borrowers avoid foreclosure. The mortgage relief options available for veteran borrowers should not be less favorable than the options available to other borrowers and should provide relief in all market conditions. We appreciate the VA’s engagement with stakeholders and look forward to working with you to find solutions...

Upsold and Weighed Down: An Analysis of a Subset of Supervised Installment Lending in Colorado

Previous research by the Center for Responsible Lending (CRL) has revealed the harms associated with high-cost installment loans, which are often marketed to subprime borrowers and have annual percentage rates of interest (APRs) in excess of 36%. This paper explores a different segment of the installment loan market: loans made by consumer finance companies with rates at or below 36% APR that have larger, longer terms and are often packed with fees for low-value, high-cost add-on products. The costs of these products are not included in the loans’ APRs. Using a sample of 67 collections cases...

Testimony: Mitria Spotser on the VA Housing Loan Forever Act of 2022

On December 14th, Mitria Spotser, a consultant for the Center for Responsible Lending (CRL) testified before the House Committee on Veterans Affairs hearing on a discussion draft bill, the VA Housing Loan Forever Act of 2022. Her written testimony is available for download and the recorded video is available below.

Veterans Affairs Loan Refund Program

From the letter to the U.S. Department of Veterans Affairs (VA): The dramatic increase in interest rates since the turn of the year has significantly reduced the effectiveness of VA’s current loan modification program. As a result, an additional loss mitigation option is needed to help veterans who cannot afford to resume their originally scheduled mortgage payments and are in need of payment relief. The refund program gives VA the latitude to adjust the terms of the mortgage without increasing the note rate to the prevailing mortgage rate, which will allow the program to provide the payment...

Coalition Applauds CDFI Fund’s Focus on Community Development

A broad coalition of consumer groups filed comments supporting the CDFI Fund’s changes to the application for CDFI certification. In recent years, many harmful financial products have been pushed on underserved communities in the name of “access to credit” and “financial inclusion.” Most CDFIs stay away from these harmful products and are true to their mission but far too many entities have obtained CDFI status despite engaging in these irresponsible financial practices. The coalition supports the Fund’s changes to the CDFI application to close many loopholes that allowed CDFIs to offer...

Poll Results on Bipartisan Support of the Ongoing Mission of the CFPB to Regulate the Financial Industry and Protect Consumers

New data from the bipartisan polling team Lake Research Partners and Chesapeake Beach Consultingi shows that voters across the political spectrum overwhelmingly support the ongoing mission of the Consumer Financial Protection Bureau (CFPB) to regulate the financial industry and protect consumers. The new findings are consistent with over 10 years of opinion research demonstrating strong public support for the agency’s role and work. Voters are strongly supportive of a variety of specific protections aimed at new types of financial products and want the CFPB to protect consumers from excessive...

Comment: CRL and Self-Help Support the CDFI Fund’s Adoption of Meaningful Consumer Protections in CDFI Certification Application

The Center for Responsible Lending, Self-Help Credit Union, Self-Help Federal Credit Union, and Self-Help Ventures Fund strongly support the CDFI Fund’s efforts to more vigorously ensure that the primary mission of any CDFI is to promote community development. In November 2020, CRL and Self-Help urged the Fund to adopt several critical consumer protections in the Fund’s certification application. We are very pleased to see that the Fund has proposed to adopt many of those protections, including: Limiting the ability of CDFIs to lend at interest rates that exceed 36% Requiring CDFIs to lend...

CFPB Should Update Mortgage Regulations to Reduce Unnecessary Foreclosures and Reduce the Racial Wealth Gap

The National Consumer Law Center (on behalf of its low-income clients), the Center for Responsible Lending, and the National Housing Law Project submitted this comment to the Consumer Financial Protection Bureau in response to a request for information regarding mortgage refinances and forbearances.

Payment Supplement: A Loss Mitigation Option to Provide Payment Relief for FHA Loans in a High Interest Rate Environment

As of the end of August 2022, 350,000 FHA borrowers were seriously delinquent. Some of these borrowers will regain their financial footing, cure their delinquency, and resume their monthly payments, while others will sell their homes. The remainder will need a reduction in their monthly payment to an affordable level to remain in their home. However, the combination of the mechanics of an FHA modification and a substantial rise in the mortgage rate has made modifications ineffective at delivering payment reduction. To modify an FHA loan, the loan must be purchased out of the mortgage-backed...

“Paying from the Grave”: Historically Black Colleges and Universities (HBCU) Alumni and the Burden of Student Loan Debt

More than 44 million people in the United States—roughly one in six adults—collectively hold more than $1.6 trillion in federal student loan debt. Although many Americans are burdened by their student loan debt, borrowers who attended Historically Black Colleges and Universities (HBCUs) have been especially hard hit, due to the impacts of systemic racism on wealth accumulation for families and unequal resource distribution among institutions. Carrying student debt makes it difficult for many HBCU graduates to engage in wealth-building activities like purchasing a home or investing for...

The Protecting Wages of Essential Workers Act of 2022 (Protecting Wages Act)

The Protecting Wages Act will keep more money in the pockets of working people struggling to pay rent and put food on the table, while still allowing the collection industry to collect debts. Protects Enough Wages for Basic Needs From Seizure: Protects $1,000 in disposable earnings per week from being seized for old debts, or 75% of disposable earnings, whichever protection is greater. Current law hasn’t been updated since 1968 and only protects $217.50 a week (or 75% of disposable earnings, if greater) from seizure–nowhere near enough to meet basic needs. Protects Consumer Purchasing Power...

Unsafe Harbor: The Persistent Harms of High-Cost Installment Loans

Over the past decade, the high-cost small-dollar loan market, once dominated by short-term balloon payment payday loans, has seen the rise of high-cost installment loans with longer terms. Payday loans are typically repaid in a lump-sum, usually due in 14-day periods. Installment loans tend to be larger in size and repaid in several installments, typically over a period of several months. Although they are repaid in installment terms, these loans share similar characteristics with other payday and car-title loans: a lack of underwriting; access to a borrower’s bank account or car as security...

Letter Urging the U.S. Treasury Department and U.S. Small Business Administration to reverse the Good Faith Error Rule of the Paycheck Protection Program

The Center for Responsible Lending (CRL), American Business Immigrant Coalition (ABIC), and more than 20 consumer, civil rights and advocacy groups and lenders, recently submitted a letter urging the U.S. Treasury Department and U.S. Small Business Administration (SBA) to reverse the Good Faith Error Rule that has prevented more than 300,000 small business owners from obtaining forgiveness of Paycheck Protection Program (PPP) loans. Read the full letter.

Bank and Consumer Groups Petition CFPB for Oversight of Non-bank Personal Loans

The market for personal loans is massive and growing, yet the fintechs and other non-bank lenders who make such loans are not subject to regular oversight by the Consumer Financial Protection Bureau (CFPB), which has “created an unlevel playing field and a large risk to consumers,” write the Consumer Bankers Association (CBA) and the Center for Responsible Lending (CRL). The groups jointly filed a petition for the CFPB to develop a rule that would define larger participants in the market for personal loans so that sizable non-depository lenders would be subject to consistent CFPB supervision...

The FTC Must Work to Make the Auto Lending Marketplace Safe from Unfair and Deceptive Trade Practices

Cars are essential for most households in the United States, but access to a safe, affordable vehicle is increasingly limited for many consumers by sharply rising prices, burdensome accompanying debt obligations, and problematic dealer practices. The cost of a vehicle represents such a significant proportion of many American households’ total annual income that over 88% of new car purchases and 45% of used car purchases are financed. Enforcement actions by federal and state consumer protection agencies, as well as private litigation, have highlighted auto dealer practices that exploit the...
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