Research

In May 2008, the Federal Reserve Board, the Office of Thrift Supervision, and the National Credit Union Administration issued a joint proposed rule governing overdrafts. The rule would allow financial institutions to continue giving customers expensive loans even though they never asked for them. Research shows that the vast majority of bank customers are automatically signed up to receive costly overdraft loans, but would rather transactions be declined if they don't have sufficient funds in their bank account. But the regulators' proposed rule puts the burden on consumers to unsubscribe if...

"Yeah, people got bad mortgages. But others were able to finally buy a home" begins a recent article in a national magazine, repeating the common assumption that subprime mortgage lending has helped increase the overall level of homeownership. But a new CRL analysis shows that while the subprime market has produced more than $2 trillion in home loans over the past nine years, these loans have led or will lead to a net LOSS of homeownership for almost 1 million families. The reason for this net loss? From 1998-2006, only 9% of subprime loans went to first-time homebuyers, but over 15% of...

Survey confirms public support for cracking down on high-cost lending As Congress debates various financial reforms designed to revive the economy, the Center for Responsible Lending has conducted a national survey to measure public support for one strategy on the table: a 36 percent cap on annual interest rates for consumer loans. The survey found high levels of support for such a measure, which had very little variance across different demographic groups. Specifically: Three out of four Americans who expressed an opinion think that Congress should cap interest rates at some level. 72% think...

New CRL analysis finds that California's payday lenders overwhelmingly locate in African-American and Latino neighborhoods, even after controlling for income and other factors, draining $247 million in the process Payday loans trap working households in long-term debt at annual interest rates of over 400 percent. In California and elsewhere, African Americans and Latinos make up a disproportionate share of payday loan borrowers. Our analysis reveals that payday lending storefronts are most heavily concentrated in African American and Latino communities in California, even when controlling for...

The Federal Reserve Board is considering implementing a new rule that would require financial institutions to get explicit permission before enrolling their account holders in an overdraft system that automatically approves debit card and ATM transactions, and assesses an average $34 fee if there is a negative balance in the account. A Center for Responsible Lending survey conducted by market research firm Macro International, Inc. explored consumer preferences on this issue, and found that U.S consumers overwhelmingly want to choose whether overdrafts on their debit cards are covered or not...

Overdraft lending: the problem Our nation's major banks and credit unions are making unsolicited, high-cost loans to their checking account holders when their account balance dips below zero, generating enormous fees for the banks and frequently driving their customers deeper into the negative. Financial institutions never have to reveal that customers pay triple- and quadruple-digit interest rates. They make overdraft loans without customers' consent, and they manipulate the order in which they clear deposits and withdrawals in order to maximize overdrafts. Research shows that low-income...

Fremont case touted as a model for other states State shows that business as usual in subprime lending amounted to unfair and deceptive practices. CRL is encouraged by the recent success of the Massachusetts Attorney General (AG), who used longstanding consumer protection laws to stop foreclosures on unfair subprime loans. CRL believes the AG's approach could serve as an effective litigation strategy for others looking to discourage abusive lending practices, including the ability to require subprime lenders to negotiate with the AG's office before foreclosing. A Massachusetts court held that...

Read CRL CEO Martin Eakes' statement on the Housing Plan >> Hope for Stopping the Foreclosure Epidemic On February 18, 2009, the President announced a new, comprehensive plan for addressing the housing crisis. The plan, which called for more funding than anticipated, includes a range of incentives that will encourage lenders to modify loans. The plan recognizes that stopping foreclosures is essential to stabilizing the economy. Highlights: The plan commits $75 billion to help 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. Encourages lenders to modify at...

Payday loans create a cycle of debt that diminishes the income of vulnerable households Marketed as short-term relief for a cash crunch, payday loans carry annual interest rates of 400 percent and are designed to catch working people – or those with a steady source of income such as Social Security or a disability check – in a long-term debt trap. The terms are set so that borrowers most often cannot pay off the loan on payday when it's due without leaving a large gap in their budget, often forcing them to immediately take out a new loan after paying the first one back. One recent study found...

Recent industry projections are that over eight million families will lose their homes to foreclosure over the next four years. That's one in every six homeowners with a mortgage. If the economy enters a deep recession, the number of homes lost could exceed 10 million. With the housing sector responsible for one in eight U.S. jobs, the flood of new foreclosures will contribute to the growing unemployment rates and further constrict consumer spending. Banks are foreclosing on homes at a rate of approximately 40,000 per week. The failure to stem these losses imposes a cost to the taxpayers every...