Research & Policy

The undersigned consumer organizations and attorneys write to urge the Consumer Financial Protection Bureau to issue a final PACE rule. Last year, we applauded the Bureau for proposing a strong rule that would ensure PACE borrowers receive critically important consumer protections under Regulation Z. But the proposed rule came five years after Congress amended the Truth in Lending Act (TILA) to require the Bureau to issue regulations on residential PACE (R-PACE) loans, and now almost a year has passed without a final rule. Further delay by the Bureau in finalizing the rule, combined with an...

More than 120 affordable housing, consumer, health, energy efficiency, environmental, business, and other organizations at the national, state, and local levels joined this letter to urge the FHFA to direct the Government Sponsored Enterprises, Fannie Mae and Freddie Mac, to join the Department of Housing and Urban Development (HUD) and the Department of Agriculture (USDA) in requiring that all new homes with mortgages backed by the Enterprises meet updated building energy code requirements.

From the comment's introduction: Many mortgage lenders are willing to offer cash-out refinances because the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, the Federal Housing Administration (FHA), or the Department of Veterans Affairs (VA) bear the credit risk. However, fewer lenders are willing to make home equity loans, especially to borrowers with lower credit scores, given the associated credit risk and the lack of a developed secondary market. As a result, despite the benefits of home equity loans over cash-out refinances described below, many borrowers continue to...

CRL submitted a comment on the Proposed Rule by the U.S. Department of Education on Student Debt Relief for the William D. Ford Federal Direct Loan Program (Direct Loans), the Federal Family Education Loan (FFEL) Program, the Federal Perkins Loan (Perkins) Program, and the Health Education Assistance Loan (HEAL) Program. The Proposed Rule is critically important to Black, Latino and low to moderate income (LMI) communities because its enactment will substantially reduce or eliminate loan debt and support wealth building and financial stability that has evaded too many borrowers. Waivers in the...

Earned or Early Wage Advance (EWA) products offer workers access to their wages before payday, usually for a fee. While low-wage workers can benefit from EWA programs that are properly designed and regulated, they can instead be harmed when products are allowed into the marketplace without guardrails keeping their use and cost within reasonable bounds. States should regulate all EWA products as credit and require compliance with consumer protections that prevent predatory lending debt traps commonly associated with payday loans. Download to continue reading

The 193 labor, civil rights, consumer, legal services and community groups and academics joined in this letter to express opposition to the draft Earned Wage Access Consumer Act. In the guise of offering protections, the bill obscures its true effect: to exempt fintech cash advances from the Truth in Lending Act, to endorse a form of loan that makes workers pay to be paid, and to facilitate new evasions by payday lenders. It is especially inappropriate to authorize a new class of fintech cash advances with costs imposed on lowwage workers, disproportionately impacting communities of color and...

Among the hottest consumer finance topics in recent years is the proliferation of online lenders offering fintech cash advances, including the subset of those lenders who offer earned wage advances (EWA). These are very short-term loans of small dollar amounts that users can access through a smartphone app. Lenders that offer these products strenuously attempt to avoid being regulated like other lenders and rely on legal fictions to assert that their loans are not credit. These lenders also typically argue that their products further financial inclusion while, in reality, the worst versions of...

Consumers who took out small loans using cash advance apps paid triple-digit annual interest rates, experienced high levels of repeat reborrowing, and incurred more bank overdraft fees.

CRL submitted a comment on the CFPB’s Notice of Proposed Rulemaking on overdraft fees for very large institutions. We advocate for a $6 benchmark and safe harbor for courtesy overdraft fees. We argue the proposed rule is a required and important step towards better protecting consumers that would be greatly improved by eliminating the potential for financial institutions to evade the intent behind the exemption by further narrowing it to include parameters on: (1) limitations on the frequency and total number of overdrafts, (2) precluding fees for de minimis overdraft amounts, and (3)...

The National Consumer Law Center, on behalf of its low-income clients, and the Center for Responsible Lending write with recommendations on how FHA should shape its post-COVID loss mitigation waterfall. As the market turns from a response to COVID-19 to identifying permanent policies informed by lessons learned from the pandemic, FHA has an opportunity to strengthen the options it makes available to homeowners facing hardship. FHA has shown leadership in developing innovative foreclosure alternatives that provide relief in any market condition. We believe FHA should build its long-term loss...

This legislation purports to provide a safe harbor for financial innovation, but too often, “innovation” is synonymous with a lack of meaningful safeguards for consumer financial products. Creating these regulatory “sandboxes” for companies would force agencies to shirk their statutory duties to enforce the law and protect consumers and instead prioritize allowing risky and unproven products into the marketplace before they have been fully evaluated to ensure that they comply with the law and are safe for consumers to use.

Read a new report from CRL and California Policy Lab on the Department of Education’s latest income-driven repayment plan, SAVE which could revive the homeownership dreams of millions.

The Department of Education’s newly launched income-driven repayment (IDR) program, “Saving on a Valuable Education (SAVE),” represents a significant step forward in improving the affordability of federal student loan repayments for millions of borrowers. SAVE accomplishes that goal by basing repayment on a realistic estimate of a borrower’s discretionary income considering the borrower’s family size and reducing the amount of income that applies to repayment by half. The plan also prevents unpaid interest from increasing a borrower’s loan balance and ensures that any remaining balance is...

The Center for Responsible Lending submitted a comment to the Board of Governors of the Federal Reserve System (Federal Reserve Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) regarding the large bank regulatory capital rule. While we commend the Agencies for seeking input on this important topic, we have significant concerns with the existing proposal’s potentially chilling impact on portfolio mortgage lending by larger banking participants. As written, the proposed rule would significantly increase the capital required for...

The undersigned organizations, which together represent a broad cross-section of regulated banks, credit unions, and consumer protection organizations, wrote a letter in thanks for introducing the Close the Shadow Banking Loophole Act, and to express their support for this critical legislation which would close the industrial loan company (ILC) loophole in current law. Americans for Financial Reform Bank Policy Institute Center for Responsible Lending Consumer Federation of America Credit Union National Association Independent Community Bankers of America Mid-Size Bank Coalition of America...

The Center for Responsible Lending, Housing Policy Council, Mortgage Bankers Association, and National Consumer Law Center (on behalf of its low-income clients) wrote to the Department of Veteran Affairs (VA) to recommend that the VA pursue payment reduction targeting rather than interest rate targeting as part of their upcoming VA Servicing Purchase (VASP) loss mitigation option.

The Center for Responsible Lending and the National Consumer Law Center (on behalf of its low-income clients) wrote a comment letter to FHA Commissioner Julia Gordon to applaud FHA for developing a program to provide payment relief in this current interest rate environment.

In the 1990s payday lenders partnered with banks to create a practice known as Rent-a-Bank. This practice, which has now moved online, exploits a provision of federal law that allows banks to export their interest rates across the country, ignoring state laws meant to protect borrowers from abusive high-rate lending that can lead to a debt trap. Rent-a-Bank arrangements allow online lenders to exceed state limits on loans used to finance the purchase of everything from puppies to car repairs, including expensive debt consolidation loans made to people already struggling to meet their monthly...

In the 1990s payday lenders partnered with banks to create a practice known as Rent-a-Bank. This practice exploits a provision of federal law that allows banks to export their interest rates across the country, ignoring state laws meant to protect borrowers from abusive high-rate lending that can lead to a debt trap. While predatory lenders originally used store-front payday locations when this evasion scheme began, today’s high-cost lenders have moved their tactics online under the glossy facade of fintech innovation. These lenders are now trying to adapt their abusive high-cost lending...

The Center for Responsible Lending, Leadership Conference on Civil and Human Rights, NAACP, National Association of Latino Community Asset Builders (NALCAB), National CAPACD, National Urban League, and UNIDOS US joined in a letter to support "that CDFI certification is truly reserved for mission-driven, community development organizations."

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 for consumers. A 36% annual percentage rate (APR) cap on payday loans (including fees) is the best way to stop the cycle of debt. To date, 20 states and the District of Columbia have passed laws to cap payday lending rates around 36% APR or require other measures to ensure that payday lenders do not impose interest rates and financing terms that create a long-term debt trap for consumers. Since 2005, no state has authorized the...

The California Department of Financial Protection and Innovation (DFPI) should restore cost limits for earned wage advances and other fintech cash advances under proposed regulations rather than allow a temporary registration regime with no cost limits for up to four years, the Center for Responsible Lending, Consumer Federation of California, National Consumer Law Center, and Office of Kat Taylor said in comments filed with the Department on November 27. The groups “strongly support the provisions [of the proposed regulations] that make clear that income-based advances are loans and that...

Watch the recorded testimony of Mitria Spotser before United States House of Representatives Committee on Financial Services on the importance of protecting consumers in an evolving marketplace.

Buy Now, Pay Later (BNPL) or pay-in-four products allow consumers to purchase goods in four equal, often interest-free installments over a set time period (often 6 weeks). BNPL is often available directly at checkout on an e-commerce website (like Amazon or Apple) or through a third-party smartphone or web application. Examples of third-party BNPL providers include Affirm, AfterPay, Klarna, Splitit, Sezzle, Paypal, Perpay, and Quadpay/Zip. While many BNPL providers also make installment loans that carry interest, this research paper addresses only products that meet the Consumer Financial...

In a letter to the House of Representatives' Financial Services Committee, consumer advocates warn that the Financial Services Innovation Act of 2023 would facilitate evasion of existing consumer protection laws and regulations. Citing the foreclosure crisis around 2008 and other examples, the letter states: "Blind endorsement of 'innovations' leads to consumer harms." The bill, currently a discussion draft, was considered as part of a House Financial Services Subcommittee hearing "Modernizing Financial Services Through Innovation and Competition," held on October 25, 2023— a hearing that the...