Research & Policy

Debt buyers purchase old debts from creditors for pennies on the dollar and then hire debt collectors or attorneys to force consumers to pay up, often by suing them in court. Recent enforcement actions by state and federal regulators show widespread abuse and improper lawsuits brought to try to collect the old debt. Abuses include things like robo-signing affidavits in support of collection lawsuits and illegally suing residents for time-barred debt.

In response to a request for comment, CRL offered feedback to the Consumer Financial Protection Bureau about the agency's proposed rule addressing prepaid cards. The CFPB's proposed rule would expand consumer protections on prepaid cards in significant respects. The CRL comment focuses on credit products associated with prepaid cards – with a particular focus on overdraft fees. The CRL comment strongly urges the CFPB prohibit any overdraft charges on prepaid cards. CRL's comment supports that CFPB's proposal would apply stronger regulations to overdraft fees on prepaid cards than the wholly...

This paper's findings highlight that the lack of underwriting for payday loans creates economic distress for borrowers from the very first loan: Nearly half of all payday borrowers defaulted within two years of their first loan. Of borrowers who defaulted, nearly half did so within the first two payday loans. Default does not necessarily signal the end of payday borrowing, with many defaulters going on to repay their loan and even borrow (and possibly default) again at a later date. Nearly one in five borrowers had a loan charged off by the lender. One-third of payday borrowers experienced at...

On March 26, the Consumer Financial Protection Bureau offered a first look at proposals under consideration to curb the payday loan debt trap. The consumer agency released information outlining their deliberations at a field hearing in Richmond, VA – at which the agency also heard from a panel of consumer and civil rights advocates, as well as payday industry representatives. The proposal released contains two main parts: Short-term loans (45 days or less) The proposal for short-term loans would provide the lender with two options: Determine ability-to-repay at the front-end, based on a...

Some colleges and banks enter into exclusive agreements to offer students checking accounts – usually these accounts come furnished with a debit card that prominently displays the school logo and can sometimes be used as student ID. For banks, these exclusive agreements mean a captive audience for their bank products (checking accounts, credit card accounts) and usually a customer for life. Studies suggest that banks are a "sticky" product – once a consumer chooses one, they're unlikely to change. For colleges, these exclusive agreements mean increased revenue. These partnerships may include...

On March 26, the Consumer Financial Protection Bureau offered a first look at proposals under consideration to curb the payday loan debt trap. The consumer agency released information outlining their deliberations at a field hearing in Richmond, VA – at which the agency also heard from a panel of consumer and civil rights advocates, as well as payday industry representatives. This is an important moment in the history of consumer protections and financial reforms. Payday lending has resulted in debt traps for consumers across the country. Marketed as quick and easy ways to ride borrowers until...

In this letter (2 pages), six consumer and civil rights groups ask Members of Congress to oppose H.R. 685, The Mortgage Choice Act of 2015. The groups argue that the bill would raise the cost of mortgages for millions of prospective homebuyers by allowing higher fees and creating a loophole in the landmark Dodd-Frank Wall Street Reform and Consumer Protection Act. The groups state: H.R. 685 would unnecessarily raise the cost of mortgages H.R. 685 would allow high-cost loans to qualify as QM loans by creating exceptions to the points and fees threshold; the exception would exclude fees paid to...

In "Payday Loan Rollovers and Consumer Welfare," Jennifer Lewis Priestley analyzes proprietary payday loan data for borrowers who received payday loans from 2006-2009 in California, Florida, Kansas, Missouri, Oklahoma, Texas and Utah to estimate the impact of payday rollovers on consumer welfare (as measured by changes in Vantages Score). The author finds that payday borrowers who engage in protracted refinancing or "rollovers" have positive changes to their credit scores, relative to borrowers with shorter periods of payday borrowing. In addition, the author finds that borrowers in states...

In "Do Defaults on Payday Loans Matter?" author Robert Mann uses a difference-in-difference regression-based analysis to analyze "harm" in the payday lending market. He finds that little difference in changes in credit scores between payday defaulters and non-defaulters and uses this as evidence that payday loans do not cause harm. However, this study suffers from significant conceptual and technical flaws. Even without these flaws, Mann is testing an incoherent hypothesis. Any harm to credit scores would be caused, not by default, but by the financial drain resulting from paying the...

In this letter (2 pages), 16 consumer, civil rights, and housing groups ask Members of Congress to oppose H.R. 650, The Preserving Access to Manufactured Housing Act 2015. The groups argue that the bill would roll back protections established by the landmark Dodd Frank Wall Street Reform and Consumer Protection Act and hurt low and moderate income families. The groups state H.R. 650 would: Raise the interest-rate trigger for protections under the high-cost mortgage protections of the Home Ownership and Equity Protection act (HOEPA) Raise the points-and-fees trigger for HOEPA protections Exempt...

The letter states... On August 20, 2014, the Department received a joint memorandum from the American Bankers Association (ABA) and Consumer Bankers Association (CBA),1 arguing that the Department did not have authority under Title IV of the Higher Education Act (HEA) to promulgate rules on campus banking products of the scope proposed during negotiated rulemaking in spring 2014. The ABA's analysis is incomplete, superficial, and incorrect. It should not disturb the Department's rulemaking efforts. Download the entire letter. (PDF)

A new bipartisan poll of likely 2016 voters finds that voters across party lines strongly oppose unfair lending practices and support financial regulations and enforcement by the Consumer Financial Protection Bureau. Strong Bipartisan Support Download the full memo (PDF) In particular, voters of all parties oppose a range of common payday lending practices, and strong majorities across party lines want the CFP to enforce tougher regulations to protect consumers from financial abuse. Nearly half of all voters surveyed (48%) across party lines report "very" unfavorable views for payday lenders...

In February 2013, the American Fair Credit Council, an association of debt settlement companies, released a report that claimed to assess the outcomes of debt settlement services by the industry. This report, "Options for Consumers in Crisis: An Economic Analysis of The Debt Settlement Industry," was commissioned by the AFCC, and fails to demonstrate that debt settlement leaves consumers better off and in fact overstates the benefits of debt settlement for the consumers studied. This CRL analysis details the flaws in the report.

This letter strongly urges the opposition of H.R. 527, the Small Business Regulatory Flexibility Improvements Act of 2015 (SBRFIA). SBRFIA expands the reach and scope of the Regulatory Flexibility Act and would increase unnecessary and lengthy regulatory delays, increase undue influence by regulated industries and encourage convoluted court challenges.

Media outlets continue to report on the potential dangers of the rise in subprime auto lending. Auto lenders, particularly in the subprime auto lending market, are increasingly using risky practices to fuel lending growth. The New York Times, Fortune, NPR and other news outlets reported on recent news in the subprime auto loan market, providing opportunities to explain both the changes in the market, what risky practices are on the rise, and the potential damage those practice can cause. The overall size of the auto lending market is almost $1 trillion of outstanding loans—if this growth...

The auto finance market has grown significantly in the past few years. According to Experian Automotive, outstanding auto loan balances reached a record-breaking $870 billion in the third quarter of this 2014, an increase of 9.9% and 24.5% over the same periods in 2013 and 2012, respectively. As of the end of the third quarter of 2014, loans to consumers with below prime credit comprised 38.7% of open accounts, totaling over $336 billion. Also, according to the Federal Reserve, "The dollar value of originations to people with credit scores below 660 has roughly doubled since 2009, while...

This letter urges the FHA to reduce the cost of its single-family mortgage insurance premiums to expand access to safer and more affordable mortgages to more creditworthy households. The FHA has twin missions to provide access to mortgage credit and to protect the integrity of the Fund - these missions are best accomplished using a dynamic evaluation of the FHA book of business, performance over time, and market fundamentals.

Major consumer groups have submitted comment today urging the Department of Defense to protect the men and women who serve the country by creating strong, new regulations implementing the Military Lending Act (MLA). The Center for Responsible Lending, Consumer Federation of America, Consumer Action, the National Association of Consumer Advocates, the National Consumer Law Center (on behalf of its low income clients), and U.S. PIRG joined together to urge the Defense Department to strengthen the MLA rule.

Dear Secretary Duncan, Attorney General Holder, and Director Cordray: As advocates for students, veterans, consumers, civil rights and college access, we write to express grave concerns about the proposed sale of 56 Corinthian Colleges campuses to ECMC Group, a debt collector and loan servicer. We urge you not to waive liability for any prospective buyer of Corinthian campuses unless the sale provides significant relief for current and former students and contains enforceable safeguards to protect students and taxpayers from future abuse. Last year, the publicly traded Corinthian Colleges Inc...

Read Lisa Stifler's remarks before the December 2014 CFPB Field Hearing on Medical Debt Collection on the distinct lack of standards for when a bill is sent to a debt collector or reported to credit reporting agencies. These distinctions can result in unique harms to individuals in the credit reporting context. As CFPB research has shown, consumers with medical debts on their credit reports are overly penalized in their credit scores, underestimating the creditworthiness of those with outstanding medical debt, as well those who have paid it off. As a result, they may be unjustly penalized for...

Senior Policy Council Maura Dundon submitted testimony to the Department of Education on its 2015 rulemaking agenda.

CRL and seven other civil rights organizations jointly authored a policy brief that shares the adverse impacts students of color experience and a primary impetus for a strong gainful employment rule.

On October 29, the Center for Responsible Lending joined a coalition of consumer and civil rights organization to comment on the proposed changes to the Home Mortgage Disclosure Act (HMDA) reporting requirements. Jointly, the groups applauded the utility and growth of the HMDA – which was created as a legislative response to combat urban disinvestment and the practice of redlining. HMDA requires that mortgage lenders report specific information about the loan practices every year – and that information is publicly disclosed. This information has been a critical tool for researchers, community...

By Maura Dundon Originally published by American Banker The Consumer Financial Protection Bureau's recent report on private student loans drew a sharp critique from lenders, who claim that the CFPB unfairly singles out private loans while ignoring problems with federal student loans. While the federal loan program has issues of its own, private student loans have distinct concerns. Congress instructed the CFPB to pay special attention to private loans precisely because they have a problematic history of causing long-term financial distress to borrowers. In the early 2000s, private student...