Consumers are increasingly accessing small short-term loans through digital cash advance and Earned Wage Advance (EWA) online applications. Consumers can receive advance amounts up to $750 per pay period while using these apps. Some companies contract with employers to provide this product while others work directly with consumers. In the direct-to-consumer model, the advances are often marketed as “free,” but providers require a variety of fees to expedite the advance and employ pressure tactics allowing them to collect fees in the form of “tips”. These fees make advances very costly for...
Millions of Americans continue to experience financial precarity, and this report illustrates how payday and car-title lending extract financial resources from communities across the United States.
Payday lenders charge exorbitant fees to borrowers without assessing their ability to repay, and the annual interest rates on these loans are in the triple digits.
Cash-strapped borrowers are being enticed into using the home equity they have accumulated as an ATM and cash-out refinance loans will damage their long-term financial health.
Payday loans, high-cost small loans averaging $350 that usually must be repaid in a single payment after two weeks, are designed to create a long-term debt trap. A 36% annual interest rate cap on payday loans (inclusive of fees) most effectively stops the cycle of debt. Currently 18 states and the District of Columbia have enacted rate caps of 36% or less. Since 2005, no new state has authorized high-cost payday lenders. States can and must continue to enact strong protections, such as a rate cap of 36% annual interest or less, to stop the payday debt trap.
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...
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...
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...
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...
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...