CRL in the News
Payday lenders aren’t creating jobs with their predatory lending practices, and they aren’t driving economic growth, they are standing in the way. Small business owners, their employees, and their customers would fare better with sound protections from payday lenders.
Installment lenders offer annual percentage rates that range from 36% to 100% or perhaps higher. Payday loans typically have APRs of 350% or more. "Installment loans are a much safer structure," said Martin Eakes, the co-founder and chief executive of Self-Help Credit Union and the Center for Responsible Lending, who has fought battles with payday lenders in Arizona, Colorado, North Carolina, Ohio and Washington.
The proposed rule “must be strengthened, must be significantly strengthened. The CFPB has the right approach on the ability to repay. And it must close the loopholes. It would help millions of Americans if the CFPB closes the loopholes,” said Keith Corbett, executive vice president of the Center for Responsible Lending, during a June 14 conference call with journalists on payday lending issues.
The Consumer Financial Protection Bureau’s proposed rule requiring payday and car title lenders to assess borrowers’ ability to repay will, by all projections, reduce the number of these loans being made. The question often comes up: What will those consumers who might have taken out a payday or car title loan do instead?
The Center for Responsible Lending said last year that there are 836 storefronts in Ohio generating more than $500 million in predatory loan fees each year – twice as much as they collected in 2005, Brown said.
“Payday loans are a debt trap by design and lead to cascade of other financial consequences such as increased overdraft fees and even bankruptcy,” the Center for Responsible Lending, a consumer group, said in a recent report.
Yesterday, Congresswoman Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, spoke at a press conference about the harms caused by predatory payday loans and the need for strong rules to protect victims from abusive practices. Waters spoke alongside advocates from consumer, civil rights and faith-based groups to urge the Consumer Financial Protection Bureau to finalize strong rules to rein in payday lenders, following a proposal the Bureau released earlier this month.
In a letter to Federal Housing Finance Agency Director Melvin Watt, a coalition of more than two dozen industry and consumer groups—including the Mortgage Bankers Association, Center for Responsible Lending, American Bankers Association, NAACP and National Association of Home Builders—called for the reduction or elimination of LLPAs charged by the GSEs, arguing that this risk is already being assumed by existing guaranty fees (g-fees).
Women of color are particularly vulnerable to predatory practices by subprime lenders, whether for home mortgages or short-term loans, according to the activists’ report issued Tuesday. They accuse the finance industry of “pink-lining,” a reference to the long-discredited practice by banks of “red-lining” black-majority neighborhoods.
The Center for Responsible Lending, among other groups, believes lenders should determine a borrower’s ability to repay any loan, and these loans should not be an exception, said Graciela Aponte-Diaz, the group’s policy director for California.