Research

In a recent working paper, Donald Morgan, a researcher from the Federal Reserve Bank of New York, attempts to determine whether payday lending is predatory by comparing the welfare of households in states where payday lending is unlimited versus states where payday lending is illegal. After a comparative analysis, Morgan concludes that "unlimited" payday lending enhances welfare. However, Morgan's findings...

A CRL study released in December 2006, revealed that millions of American households would lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market. The "Losing Ground" study was the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006. CRL found that despite low...

Executive Summary: Financial Quicksand New CRL study finds borrowers pay $4.2 billion every year in excessive payday lending fees Every year, payday lenders strip $4.2 billion in excessive fees from Americans who think they're getting a two-week loan and end up trapped in debt. This report finds that across the nation payday borrowers are paying more in interest, at annual...

In a working paper released last month, Morgan Rose, a researcher from the OCC, analyzes a set of subprime loans originated in Chicago to determine the impact of selected lending terms on the likelihood of foreclosure. The study finds that loans with prepayment penalties and balloon payments are 22 to 117 percent more likely to foreclose than those without such...

For the first time in 2004, lenders were required to report information to the federal government concerning the annual percentage rate (APR) charged borrowers on higher-cost home loans. The same data, collected under the requirements of the Home Mortgage Disclosure Act (HMDA), also detail several aspects of the loan transaction and the identity of the borrower, including race, ethnicity, sex...

Refund Anticipation Loans, or RALs, are an extremely popular means for taxpayers to access their refunds more quickly than waiting for a paper check or even direct deposit. The negative effects of these loans—including their cost and lack of consumer protections—are well documented. Many consumer advocates and community development professionals are rightfully concerned about the popularity of these products, but...

In August, 2004, a group of people representing free tax preparation programs, national organizations and consumer advocacy groups met in Baltimore to discuss Refund Anticipation Loans (RALs). The meeting was hosted by the Annie E. Casey Foundation, a major funder of Earned Income Tax Credit (EITC) outreach and free tax preparation for low-income working families. While the group represented a...

A report released by the Tennessee Department of Financial Institutions on February 1, 2006 reveals that Tennessee's title lending industry has taken thousands of borrowers' cars after charging borrowers sky-high rates. Findings from the report include the following: High Rates. Some Tennessee lenders charged as much as 30% per month for title loans, substantially more than the 22% per month...

With huge profits at stake, the payday lending industry is fighting reform efforts by positioning itself as "consumer friendly," misrepresenting the facts, and circumventing state laws. Claim 1: Payday loans provide needed emergency credit. Claim 2: Payday lenders serve the working middle class. Claim 3: Customers understand the cost of this service. Claim 4: Payday loans are cheaper than other...

A Georgia statute passed in May 2004 imposes stiff penalties for payday lending by non-banks and in-state banks, and is the first state law to expressly prohibit payday lenders from contriving with out-of-state banks to evade state usury limits. Soon after its enactment, several payday lenders and their bank "partners" sued the state seeking a court ruling that the Act...