Research & Policy

The Center for Responsible Lending has released the most comprehensive study ever conducted on state laws aimed against predatory lending. "The Best Value in the Subprime Market: State Predatory Lending Reforms" shows that state laws are working well for credit-strapped families in the subprime market and for responsible lenders. With strong state laws, homeowners get these advantages: Stronger protections with plenty of access to home loans Interest rates that are no different, or even lower, than rates in states that lack strong anti-predatory lending laws More responsible loans in a growing...

On March 1, 2006, Attorney General Roy Cooper announced that the last three major out-of-state payday lenders had agreed to stop making illegal loans in North Carolina. As a result, working families in the state will save almost $100 million each year -- money they can use to buy food, pay their bills, and balance their family budget. Related Resources Statement of CRL's Mark Pearce More information on payday lending... We applaud this milestone, which should be an example for other states where the payday lenders still do business. The achievement took five long years and the hard work of...

In a new working paper "Call Protection in Mortgage Contracts" Michael LaCour-Little concludes that prepayment penalties reduce the cost of credit to borrowers. However, there are several shortcomings in his analysis: inadequate data, inconsistent results, and neglect of the negative effects of prepayment penalties.

To find a model for national legislation, many lawmakers need look no further than their own backyards. People who live in states with strong laws against predatory lending are more likely to get responsible mortgages at a lower cost. Our findings show that state laws enacted to prevent predatory mortgage lending work as intended to reduce abusive loan terms without impeding credit. Strong state laws have been good for consumers while supporting a thriving subprime lending market. They provide credit-strapped families with plenty of access to responsible home loans at typical -- or even lower...

A report released by the Tennessee Department of Financial Institutions on February 1, 2006 reveals that Tennessee's title lending industry has taken thousands of borrowers' cars after charging borrowers sky-high rates. Findings from the report include the following: High Rates. Some Tennessee lenders charged as much as 30% per month for title loans, substantially more than the 22% per month allowed by Tennessee law. Most other title lenders charged 22% per month, which is 264% APR. (page 6) Illegal fees. Over one quarter of the title lenders surveyed charged illegal fees, in addition to the...

Payday industry tries to discredit CRL research... again Industry dollars funded supposed academic research A front group for the payday lending industry paid a college professor, Thomas Lehman, to write a pro-payday research report last year. The front group is Consumer Credit Research Foundation (CCRF), whose public relations director told BusinessWeek that CCRF is funded by the payday lending industry. ("This Opinion Brought To You By...", BusinessWeek Online, Jan. 30, 2006.) CCRF has now sponsored a critique--also authored by Lehman-- of CRL's "Race Matters" paper. "Race Matters" found...

This report is the first systematic investigation of the nature and extent of predatory lending in Maine. Based on research conducted during July and August 2005, we examine Maine's subprime mortgage market and determine the extent and impact of predatory lending in the state between 2000 and 2005. In this research we draw on a number of sources, including available empirical data on the subprime market, publicly available foreclosure records and lien histories, and interviews with various stakeholders and borrowers. In addition, we review the relevant laws and regulations in Maine's Consumer...

Public Chapter 440 of the Acts of 2005 significantly amends the Tennessee Title Pledge Act ("Act"), set forth in Title 45, Chapter 15, regarding the operation and regulation of the title pledge industry. Specifically, Public Chapter 440 subjects the title pledge industry to licensing and examination by the Department of Financial Institutions ("Department"). Read CRL's summary of the report >

The fear of overwhelming credit card debt is driving many Americans to hand their equity back to mortgage lenders in the form of "cash-out" refinances. Rather than generating cash to invest in the family's future or cover short term emergencies, cash-out refinances frequently serve as equity-draining transactions that only repay ("consolidate") short-term debts, such as credit card balances. Worse, the benefits of refinancing are often temporary, as homeowners build up additional new credit card debt and start the refinance process again.

The rapid rise in debt among American households over the last decade is well documented, but it is not well understood. Prior to the survey findings presented in this paper, there have been no data available to study how many American households are using credit cards and how they are managing their debt. To answer these questions, Demos, along with the Center for Responsible Lending, commissioned a national household survey of households with credit card debt. The survey provides new information about why households are in credit card debt, how long they have carried their debt and the...

The Center for Responsible Lending has released an analysis of payday lending industry data, which estimates that: Active-duty military personnel are 3 times more likely than civilians to have taken out a payday loan One in five active-duty military personnel were payday borrowers last year. Predatory payday lending costs military families over $80 million in abusive fees every year. The predatory lending problem is common knowledge for military members, their commanders, and anyone who has seen the payday cash advance centers popping up around bases.

On September 29, the House Committee on Financial Services will hold a hearing focused on mortgage brokers ("Licensing and Registration in the Mortgage Industry"). The Ney-Kanjorski bill (H.R. 1295) -- Title V -- attempts to address mortgage broker abuses by requiring states to pass uniform broker licensing requirements. Title V ignores the most serious and common abuses by mortgage brokers and overlooks the fact that 48 states already require licensing for mortgage broker companies. For consumers, Title V is a dangerous proposal that would produce these harmful outcomes: A mandatory weak...

On September 13, 2005, the Federal Reserve released Home Mortgage Disclosure Act statistics on mortgage lending showing once again that African-Americans and Latinos pay more for home loans than comparable white borrowers. Lenders claim that weaker credit records explain the disparities, but the industry opposed collecting any information in the HMDA data that would shed light on borrowers' creditworthiness. Only lenders have access to the information that would prove their point – and they're not sharing it. Research Shows People of Color Pay More to Brokers Research by Professor Howell...

For the first time in 2004, lenders were required to report information to the federal government concerning the annual percentage rate (APR) charged borrowers on higher-cost home loans. The same data, collected under the requirements of the Home Mortgage Disclosure Act (HMDA), also detail several aspects of the loan transaction and the identity of the borrower, including race, ethnicity, sex, and income. In this review, we both summarize and comment on a portion of the first report based on the new data that was written by Federal Reserve Board of Governors' researchers. In general, the...