Research

When colleges and banks team up to market bank accounts to students, protecting students' loan funds may take last place in the deal. Instead of helping students find the best account for them, these deals may push students into accounts with high overdraft fees and other harmful features. CRL research shows that overdraft fees alone on these accounts may reach over $700 year – more than the price of textbooks. The Department of Education has the opportunity to protect student loan dollars from overdraft fees in an upcoming cash management rulemaking. But there is no need to wait for a rule...

The Center for Responsible Lending applauds the CFPB for its continued focus on student loan servicing. Good loan servicing benefits both the borrower and the lender by helping borrowers successfully pay down their loans. As the CFPB holds a field hearing on student loan servicing today in Milwaukee, we offer seven ideas for a fair student loan servicing system: Prevent default by identifying at-risk borrowers and taking aggressive steps to enroll them in income-based repayment plans or providing other loan modifications Re-enrollment should be as simple as possible Fair allocations of...

In a new report, the Center for Responsible Lending – along with Americans for Financial Reform – examines the impact of advocacy efforts of policy and regulation. Download a summary of the full report. The report take stock of both gains (actions that support or defend consumer protections) and losses (actions that jeopardize or reduce consumer protections) – specifically in the following areas: Federal legislation State legislation Federal regulatory actions Federal judicial actions State regulatory actions State judicial actions Industry practices In addition, the report takes stock of...

Recent enforcement actions against debt buyers by state and federal law enforcement agencies illustrate widespread problems in the debt buyer market that must be addressed. The Federal Trade Commission recommends in its 2013 and 2010 reports that states adopt reform efforts to address these market problems. Based on its review of enforcement actions, industry data, and the FTC's reports, CRL recommends that to be effective, state reforms must include protections that ensure people are not sued in connection with time-barred debt, debt they do not owe, or for amounts they do not owe. At a...

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...

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...

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...