CRL in the News
“At the heart of this proposed rule is the reasonable and widely accepted idea that payday and car title loans should be made based on the borrower’s actual ability to repay – while still meeting other basic living expenses,” Mike Calhoun, president of the Center for Responsible Lending, said of the new CFPB rule.
Fees charged by the payday and car title loan industry cost Ohioans more than $500 million a year, mostly affecting residents who are already struggling financially, according to a Center for Responsible Lending report released last year.
In addition to the CFPB report, the Center for Responsible Lending issued a report of its own this week which found that every year, consumers lose $8 billion in fees to payday and car-title loans. Of that, car title loans represent $3.9 billion in fees each year.
Delvin Davis, senior research analyst at the Center for Responsible Lending, said even a high-interest credit card might be a better option than a car title loan. “I would avoid them at all costs,” he said. “Once you are into it, it’s hard to get out of it.”
Google announced Wednesday that it will ban all payday loan ads from its site, bowing to concerns by advocates who say the lending practice exploits the poor and vulnerable by offering them immediate cash that must be paid back under sky-high interest rates. The decision is the first time Google has announced a global ban on ads for a broad category of financial products.
"We support a front-end ability-to-repay requirement and generally oppose exemptions," said Diane Standaert, executive vice president and director of state policy at the Center for Responsible Lending. "We don't think that an income-based assessment is enough to ensure that the loan will be safe."
Are delinquencies and possible defaults on the rise, creating a Groundhog Day type scenario no one wants to relive? “With reputable companies like Moody’s and Fitch Ratings drawing attention to this occurrence, it's normal to be concerned,” says Christopher Kukla, executive vice president from the Center for Responsible Lending.
There is something, however, auto loans of all sorts share with housing loans that should concern us: a history of discrimination. A 2014 report by the Center for Responsible Lending revealed that blacks and Latinos are more likely to get sold add-on products when purchasing a car—and dealers often told them if they didn’t agree to take on the extra frills, they wouldn’t get approved for the loans.
"There are six million homeowners who are under water," said Calhoun. But many of them did not finance their mortgages through Fannie or Freddie, and, critically, "many of them are making their payments on time," he said. Jim Parrott, a senior fellow at the Urban Institute, said the economy has improved the lot of homeowners who have held on this long. "Because the economy has improved over the last several years the number of delinquent borrowers has fallen off dramatically," he said. Such a program — of which both Calhoun and Parrott were in favor — was highly contentious in 2010.
Diane Standaert, state policy director for the Center for Responsible Lending, said her focus is the extent to which online lenders are using the variance in state usury laws — which limit interest rates on personal loans — to effectively arbitrage high or nonexistent limits and apply them nationwide.