CRL in the News
These recent changes are just one piece of a broader trend that has swept across government since Trump took office—a gutting of anti-discrimination measures across the financial services, including mortgages, car loans, payday loans, and more. “This is a pattern we have observed, and it’s fairly alarming,” says Yana Miles, senior legislative counsel at the Center for Responsible Lending. “You have good policy that protects consumers and tries to address discrimination. We’re seeing these rules delayed, picked at, or invalidated.”
HR 3299, the so-called "Madden Fix," would reverse a court decision called Madden vs. Midland, which forbade banks from reselling loans to payday lenders if the loan's interest rate exceeded state limits. Rebecca Borne, senior policy counsel for the Center for Responsible Lending, said this bill would legalize what she called a "rent-a-bank" scheme. "It would permit non-bank predatory lenders to partner with banks, even superficial partnerships, to take advantage of banks' ability to pre-empt state law," she said.
"We know as a nation that homeownership is really important and it's the way that most of us have built our wealth over time," said Nikitra Bailey, an executive vice president with the Center for Responsible lending who oversees the group's coalition building and constituent relations. "When you're not inside the marketplace because of these challenges, then you don't get that opportunity, so you remain on unequal footing. So this racial wealth gap grows over time as opposed to shrinking over time."
In recent days, threats to the nation’s housing finance system have emerged. At the center of the controversy are two key issues: the obligation of mortgage lenders to ensure broad mortgage credit for all credit-worthy borrowers, and secondly, whether the nation will enforce its own laws banning unlawful discrimination.
"We are disappointed that Senators Corker and Warner are threatening to move to a new untested system removing the safeguards that ensure a more inclusive mortgage market and broad liquidity in rural communities and communities of color, and that ensure small bank lenders can compete on equal footing with larger banks," several groups, including the Center for Responsible Lending, said in a joint statement earlier this month.
As early as Valentine’s Day, the House of Representatives will vote on Rep. McHenry’s legislation, H.R. 3299, which would let financial companies, including online payday and installment lenders, charge North Carolinians 100 percent APR and potentially far higher – and override our state’s interest rate caps. If this bill becomes law, it would bless the “rent-a-bank” scheme whereby these nonbank entities form sham partnerships with banks that technically originate the loan in order to evade strong state laws.
According to Delvin Davis, with the Center for Responsible Lending, about 60 percent of people detained at the Durham jail in 2016 were held pretrial. Of that group, about 40 percent of the pretrial population (24 percent of the total population) was held on a bond of $5,000 or less.
“This actually has happened in North Carolina before. We know it is possible. We know that payday lenders will try to evade our very strong state interest rate cap exactly because this happened before,” said Kelly Tornow, the director of North Carolina policy for the Center for Responsible Lending.
More than 150 civil rights, consumer, faith and community organizations oppose H.R. 3299 including, Americans for Financial Reform, Center for American Progress, Center for Economic Integrity, Center for Responsible Lending, Consumer Action, Consumer Federation of America, Consumers Union, NAACP, National Association of Consumer Advocates, Prosperity Works, Southern Poverty Law Center and United for a Fair Economy.
A vote is expected imminently in the House on the so-called “Madden” bill, which, if it becomes law would spread predatory triple-digit loans, like a virus, to every state in America. The legislation would ensnare borrowers in financially devastating debt traps.