Research & Policy

In 2014, new mortgage lending reforms go into effect. Finalized by the Consumer Financial Protection Bureau, the reforms respond to the abusive lending practices that triggered the nation's financial crisis. The new rules also protect and preserve access to credit. Lenders must now consider whether a borrower has the ability to repay a mortgage. This change means an end to "no-doc" loans. Lenders also have incentives to originate a new category of loans called Qualified Mortgages. These "QM loans" restrict risky product features like excessive fees and teaser rates. Other reforms include new...

In reply to the Department of Education's request for comments on the form used by colleges to apply to be eligible for federal student loan funds, CRL called for attention to the arbitration agreements between schools and their students and employees. CRL said that forced arbitration undermines the transparency and accuracy of information reported by the schools, and could threaten the integrity of federal financial aid.

Debt settlement[ 1] programs too often are not the solution they are marketed to be, according to this new CRL research. Debt settlement companies promote their programs as a way for debt-strapped consumers to become debt-free while paying a fraction of what they owe their creditors. However, our research shows that debt settlement program participants may be left in a worse financial position than where they started and, furthermore, have no way to assess their likelihood of success before enrolling in a debt settlement program. Our analysis found that a client must settle at least two-thirds...

Morgan Drexen Case Illustrates Harm to Consumers In the past, debt settlement companies typically charged hefty fees upon enrollment, before settling any debts. This practice created heavy incentives for companies to sign up as many people as possible, collect fees, and not settle any debts. In light of these problems, the Federal Trade Commission (FTC) issued rules regulating debt relief in 2010. Among the most significant of these provisions is an "advance fee ban," which allows firms to collect fees on accounts only when a settlement agreement has been reached and at least one settlement...

A host of civil rights and fair housing allies joined with CRL in submitting comments to federal financial regulators and HUD. The comments which addressed proposed rules on credit risk retention requirements focus on three key recommendations: •Support for the proposed alignment of mortgage rules to restrict risky loan features; •Protection of access to credit for qualified homebuyers; and •Opposition to home down payment requirements.

In this testimony and working paper presented before the Senate Committee on Banking, Housing, and Urban Affairs, Eric Stein, CRL Senior Vice-President, reminded lawmakers that consumer concerns must not be lost in proposed housing finance reforms. Key recommendations include: Preserving broad consumer access to credit Requiring secondary market entities to serve a national market Converting stock ownership of secondary market entities to mutual ownership; and Ensuring small and regional lenders remain competitive in the secondary mortgage market

The National Consumer Law Center, Consumer Federation of America, Center for Responsible Lending and 26 other consumer and civil rights groups sent a letter to federal regulators urging stronger measures to stop illegal payments from being taken out of consumers' bank accounts. The letter went to federal bank regulators, the U.S. Department of Justice, and the Federal Trade Commission.

A Framework for Housing Finance Reform, CRL's new working paper looks to how what's worked well at Fannie Mae and Freddie Mac before conservatorship, can be preserved. Conversely, it also identifies core causes of what went wrong with the two GSEs. The paper's ultimate goal is to bring forth ideas that will provide long-term stability in the marketplace.

Payday loans, whether made online, in stores or by banks are designed to trap individuals in long-term debt. Data consistently show that the majority of payday loan revenue comes from repeatedly churning borrowers, and individuals are typically indebted for most of the year. The predatory features of payday loans, and the impact of their long-term debt on consumers, have in recent years drawn the attention of legislators and regulators. Policymakers at all levels have acted to limit the payday lending debt trap, particularly in recent months.

Download the Report As a supplement to our full research publications, these resources tell the story of our on-going State of Lending research series visually, through graphs, charts, maps, and video. Related chapters: Mortgages, Auto Loans, Credit Cards, Student Loans The Spillover Cost of Foreclosures by State The Three Scapegoats Your Next Car Loan: Avoid Paying Too Much Prepaid Cards: Which is Best For You Growth in Plastic Payments Student Loans: Federal vs. Private Related chapters: Car-Title Loans, Overdraft Loans, Bank Payday Loans, Payday Loans Car-Title Borrowers' Two Bad Choices...

This letter authored by representatives of the nation's largest civil rights advocacy organizations speaks to key policy concerns: preserving both access to mortgages and low down payments. Together, these two issues enhance the abilities of families to build wealth.

In order to create a rule that meets consumer protection goals while also providing flexibility, the CFPB has established four different paths for loans to gain QM status. Each is detailed below: 1. General Definition: The general Qualified Mortgage definition requires eligible loans to not exceed the points and fees threshold, not have negative amortization or interest-only payments, not be a balloon and have a term that does not exceed 30 years. In addition, borrowers must have a back-end debt-to-income ratio at 43% or below. Lenders must collect and verify a borrower's income, assets, debts...

Five years after the start of the economic crisis, public opinion continues to solidly favor both strong regulation of banks and financial companies and the need for the Consumer Financial Protection Bureau, according to a national telephone survey of likely voters conducted this summer. The survey of 1,004 likely voters was conducted between July 8-11, 2013, by Lake Research Partners on behalf of Americans for Financial Reform and the Center for Responsible Lending. It included a mix of big-picture and issue-specific questions. Voters were asked both about reform measures that have already...

Payday loans—high-cost, quick-fix loans that trap borrowers in debt by design—cost cash-strapped American families $3.4 billion in fees every year. Of that number, more than two-thirds—$2.6 billion--is a direct result of churning borrowers into loan after unaffordable loan. This churning dramatically increases payday lending fees without providing borrowers with access to new credit. Payday loans have multiple features that make them dangerous for borrowers: a lack of underwriting for affordability; annual percentage rates (APR) averaging 300%; a quick repayment period of their next payday, at...

Even in the face of strong opposition by banking regulators, a few banks continue to make triple-digit payday loans. In this chapter, our analysis shows no meaningful distinction between storefront payday lending and bank payday lending. Banks give their products names such as "Ready Advance" and "Early Access," but these loans come with the same predatory features and produce the same negative outcomes for borrowers. Bank payday loans carry an annual percentage rate (APR) that averages 225 to 300 percent. In 2011, the median borrower took out 13.5 loans, with over 1/3 of borrowers taking out...

In this analysis of the fifth report by the Monitor of the National Mortgage Settlement, the Center for Responsible Lending concludes that borrowers have benefitted from more transparent oversight of the negotiated servicing practices by participating banks. With more than $51 billion in gross benefits have been provided to 643,000 borrowers, CRL also poses questions on outstanding items.

The financial harm caused by over 12.5 million foreclosures from 2007-2012 is the focus of this brief, the fifth in a series of updated on related findings. Between 2007 and 2012, over 12.5 million homes have gone into foreclosure. These foreclosures directly harm the families that experience them, obviously, and they also have negative effects that extend to the neighborhood, community and wider economy. There are myriad costs of foreclosures, but in this report we focus on one: the economic impact on neighboring homeowners who lose home equity as a result of reduced property values. This...

As various proposals call for mortgage lending reform, CRL speaks to the importance of preserving broad access to credit. This fact sheet also explains how government-mandated down payments would deny many consumers the chance to become first-time homebuyers.

August 8, 2013 This legislative session was truly like no other in recent history. Many changes to existing laws were made, and certainly our laws protecting consumers from predatory lending were targeted. A stated objective of the 2013 legislature was to reduce regulation and revise North Carolina's business-related laws to be no more stringent than federal law. This, coupled with the highly polarized political environment and the ample campaign contributions of our opponents, created challenges for us this legislative session. We also faced a large number of freshman legislators unfamiliar...

Although the Military Lending Act has resulted in significant improvements, Service members continue to be the target of predatory lenders. In 2012, members of the military filed 61,642 complaints with the Federal Trade Commission's Military Sentinel system. Twenty-two percent of complaints filed by enlisted members were about debt collection, banks/lenders and credit cards. The Department of Defense (DoD) invited comments on whether to expand the Military Lending Act, particularly focusing on whether DoD should expand the current law's definition of "consumer credit." CRL and other groups...

Since 2008, 1.4 million homeowners have benefited from the National Foreclosure Mitigation Counseling Program. Additionally, over 39,000 of these consumers have also received mortgage-related legal assistance. Yet more efforts are still needed. This 2013 document identifies the nation's "areas of greatest need".

In spite of regulatory changes in recent years, many banks and credit unions continue to charge abusive fees on debit cards and checking accounts. In "High-Cost Overdraft Practices," CRL discusses these findings: In 2011, overdraft fees cost consumers $16.7 billion. Debit card transactions trigger the most expensive fees. On debit card purchases, the median overdraft charge is $35 for a $20 overdraft. Debit card purchases and ATM transactions account for at least 35% of all overdraft fees. Two-thirds of these penalty fees are paid by account holders charged more than six fees per year. Banks...

On July 24, 2013, Rebecca Borné, senior policy counsel for CRL, testified before the Senate Special Committee on Aging on how payday lending affects senior citizens. In her testimony, Rebecca made the following points: CRL Testimony Watch Rebecca's testimony. The Payday Trap Watch Annette's testimony. Payday loans are designed to create a long-term debt trap. Payday loans cause borrowers severe harm, leaving them worse off than they were before the first payday loans. Payday loans were legalized only in relatively recent years based on the claim they would be used for emergencies, but they...

Michael Calhoun, CRL President, testified before a House Financial Services Committee hearing on housing finance reform and the future of homeownership. This testimony shares CRL's belief that all proposals preserve access to affordable mortgage credit.

Car-title lending — making expensive loans secured by the title of a vehicle a borrower owns out-right — has become a multi-billion dollar industry in the U.S. over the last decade. CRL estimates that car-title lenders generate nearly $2 billion in loans annually, with borrowers paying more than $4 billion in fees — twice the amount loaned — in the process. While borrowers in most states are protected from these high-cost loans, 21 states permit these products that trap borrowers in debt and put one of their most significant assets on the line. This chapter discusses key abuses in car-title...