CRL in the News
Chris Kukla with the Center for Responsible Lending said there are safety concerns. “You’re on your way to pick your kids up, you stop at the store and suddenly you can’t start your car and your kids are left alone at a school,” Kukla said. “Or there are certainly stories of families where the mom was trying to get a kid to the emergency room and they got out to the driveway and couldn’t start their car.”
“Lenders were abusing the system to siphon money out of service members’ paychecks,” says Christopher Kukla, an executive vice president at the Center for Responsible Lending who oversees its auto lending work. The CFPB worked with the Defense Department to create new protections in its program, he says. “It’s led to really significant reform.”
While interest rates on short-term loans might seem astronomically high — the pro-regulation Center for Responsible Lending estimates the state’s average payday loan rate to be 653 percent — industry members like Fullmer say small-dollar, short-term loans should be viewed more as an alternative to sky-high overdraft fees offered by banks, or as a last-minute alternative to financial emergencies, such as someone’s utilities being shut off.
Abusive financial practices add up to big bucks. According to the Center for Responsible Lending, the fees associated with payday and car title loans cost workers in America nearly $8 billion per year. For Latinos, the impact is even greater. In the lead up to the Great Recession, financial institutions steered Latino families into subprime loans, even when those families could have qualified for a conventional loan. This led to higher default rates, foreclosures, and an evisceration of two-thirds of Latinos’ household wealth.
An old adage teaches, “if at first you don’t succeed, try, try again.” In recent months, the troubled Accrediting Council for Independent Colleges and Schools (ACICS) tried and lost two legal attempts to recover eligibility for federal education funds.
About $480 million in payday and car title loan interest fees is paid each year by Alabamians, the sixth highest annual figure in the nation, said Diane Standaert, director of state policy at the Center for Responsible Lending. Of that total, $116 million was from payday loans.
Auto title loans are very similar to payday loans in their terms, except the former uses a borrower's vehicle as collateral in the deal. According to a study from the nonprofit Center for Responsible Lending, some 60% of all short-term lending shops in Ohio offered both payday and auto title loans.
As Black History Month observances continue throughout the nation, now is an apt time to revisit the unmet housing finance challenges that affect African-Americans, other consumers of color and low-income whites. While many consumers have felt an economic recovery, many others remain locked out of homeownership and the resulting opportunity to build wealth through home equity. In order to open up homeownership opportunities to those left behind, public policies must address the impact of mortgage discrimination by promoting robust mortgage lending to all creditworthy borrowers.
Both proposals would leave families vulnerable to financial abuse and risk bringing back a financial crisis, says the Center for Responsible Lending’s Policy Counsel Yana Miles. “Passing either of these bills will revert us back to an era of reckless lending behaviors that led us to the Great Recession,” she said, in a statement. “The pernicious bill to undermine CFPB’s budget will embolden payday lenders and bad actors on Wall Street to continue influencing lawmakers to halt the Bureau’s funding, leaving consumers vulnerable to predatory abuse.”
In a Feb. 9 BankThink article discussing a path forward for the Department of Justice’s civil rights division under President Trump, Paul Hancock claims that the Obama administration pursued too many fair-lending claims against banks and lenders, exceeding the statutory bounds of fair lending enforcement. In his view, these cases lacked adequate proof. But his op-ed overlooked clear evidence that financial institutions’ methods targeted in these actions were discriminatory, and that the regulatory approaches to address this discrimination meet current legal standards.