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North Carolina Legislative Update August 16, 2018

August 16, 2018
Consumer Finance
Bill Law

Dear Coalition Supporters,

This update covers important predatory lending developments over the past few months, including action at the NC General Assembly, challenge of the payday rule in Congress (spoiler, we won!), threats to our state usury cap, rollback of federal student loan protections, and recent CRL research.

NC General Assembly: What Happened?

House Bill 810, backed by the NC-based BB&T, would have tripled the origination fee on consumer loans issued by NC-chartered banks to $150, and could have more than tripled the late fee by increasing the fee to $35. Most worrisome was the potential for the bill to make bank payday lending more lucrative by increasing these fees. We worked with stakeholders to craft compromise language which would have prevented such an outcome. Ultimately, the bill died, so we escaped any increase to the fees at all.

As the final days of the NC General Assembly short session, the rent-to-own industry tried a “gut and amend“ strategy to fast-track Senate Bill 374. They stripped language from an unrelated bill that had passed the Senate in 2017, and inserted language that would let them charge unlimited fees, interest and other charges, reaching triple-digit interest rates. The bill also created a regulatory structure with no consumer protections. With quick Coalition action, particularly military opposition, this bill did not pass.

Consumer Finance

Payday Loans

Congress Upholds National Payday Rule

Though I know this happened months ago, this victory was literally years in the making, and deserves celebrating again. We stopped Congress from rolling back the Consumer Financial Protection Bureau’s (CFPB’s) national payday rule. Thank you so much for all you did – joining sign-on letters, calling your Congressmember and challenging them in public meetings, tweeting, writing op-eds and letters to the editor, and talking to reporters. You were awesome! See more...

Consumer Bureau Joins Payday Lenders to Kill Own Payday Rule

Yes, you read that right. The payday lenders filed a lawsuit to stop the national payday rule. In an unprecedented move, CFPB Acting Director Mulvaney, a payday champion, joined the payday lenders in challenging his agency’s own rule. In this initial challenge, the court ruled against the payday lenders and Mulvaney. In addition to this lawsuit, Mulvaney has made it clear that he intends to reopen the rule, doing whatever he can to water it down or kill it.

We expect the payday rule would fare no better under Trump’s nominee for Bureau Director, Kathy Kraninger. Kraninger has no experience in consumer protection or financial services and has pledged to continue the disastrous direction of Mulvaney's leadership. Thank you for joining the sign-on letteropposing her nomination. We will keep you posted on her confirmation hearing.

Payday Lending by National Banks, Credit Unions & Fintech Companies

Under the guise of supporting online lending and financial innovation, federal regulators are stepping up efforts to let high-cost lenders ignore state usury protections. US Treasury just released extreme proposals to open the floodgates to predatory lenders. Treasury supports rescinding the national payday rule, arguing that states have this issue under control. But then, it proposes to let high-cost lenders ignore state laws by getting their own national charter or partnering with an out-of-state bank. Read more in our press release and American Banker article.

The Office of the Comptroller of the Currency (OCC) dropped its guidance that prevented banks from making 200 to 300% bank payday loans and is planning to issue national charters to financial technology (fintech) companies, again letting them preempt state law. See the letter to bank regulators that we also sent to 200 bank presidents and board members.

And, the National Credit Union Administration (NCUA) wants to expand its Payday Alternative Loan (PAL) program to let credit unions make larger and more expensive loans, blurring the line between credit unions and predatory lenders. Thank you for joining the sign-on letter opposing these NCUA changes. CRL, Self-Help and the National Consumer Law Center also submitted a longer comment.

And, if that weren’t enough, Congress is considering bills that would open our state to predatory lenders by legalizing the rent-a-bank model. When payday lenders were forced out of NC in 2001, they partnered with out-of-state banks to make loans here illegally for five more years. Several bills, including HR 3299sponsored by Rep. Patrick McHenry (NC-10), would sanction these rent-a-bank arrangements.

Consumer Finance

Student Loans

With 44 million consumers carrying $1.5 trillion in student loan debt, it is not surprising that new polling shows large agreement that student loan debt is at a crisis level.

Despite this growing concern, DeVos’s Department of Education (DoE) is working at breakneck speed to roll back protections for student loan borrowers put in place under the Obama administration. She plans to drop rules that protect students from fraudulent for-profit collegesleave them with huge debt if these schools close, and protect student loan servicers from effective oversight at the expense of students and taxpayers. Attorneys General, including NC AG Josh Stein, challenged DoE’s claim that states are preempted from regulating student loan servicers.

Stein has also opposed DoE’s decision to withhold student loan information from law enforcement agencies making it harder for him to protect student loan borrowers. And with the recently announced closures of the Art Institutes in Charlotte and Durham and South University in High Point, it is more important than ever to fight for tougher accountability and standards for these for-profit schools.

CRL Research

North Carolina State, County, and Congressional District Annual Fees Savings without Payday and Car Title Lending: By not having payday and car title lending in our state, North Carolinians save over $457 million every year. In this new report, we show how these North Carolina fee savings break out by county and congressional district.

The State of For-Profit Colleges: For-profit colleges are big business, primarily funded by taxpayers. Unfortunately, given the poor quality and high cost, students are often unable to graduate and get jobs in their field. They bear high burdens of debt and often default. Low-income families, communities of color, and women are disproportionately affected by for-profit college abuses. See our North Carolina factsheet.

A Bitter Pill: Gainful Employment and Credentialism in Healthcare Support Fields: This CRL research report looks at problems faced by student loan borrowers in for-profit health care programs and recommends policy changes to protect these students from abusive and fraudulent practices. Florida focus group participants who have attended these schools report a grim reality, being mired in debt and often unable to find even subsistence-level employment in the field for which they trained.

Unfair Market: The State of High-Cost Overdraft Practices in 2017: Banks continue to engage in unfair practices to drive up overdraft fees. According to new data from the FDIC, the largest banks in America collected $11.45 billion in overdraft and non-sufficient funds (NSF) fees in 2017, an increase of approximately $10 million over the 2016 total. A small proportion of bank customers, generally living paycheck to paycheck, pay a large proportion of these massive overdraft fees.

CRL Press Releases

See other CRL press releases from the last few weeks: