California Reinvestment Coalition Goes to Washington

Last week, members of the California Reinvestment Coalition traveled to Washington, DC, for the annual National Community Reinvestment Coalition conference.  The theme this year was “Creating a Just Economy.”

Keynote speakers during the conference included Federal Reserve Chair Janet Yellen, CFPB Director Richard Cordray, Representative Maxine Waters who is Ranking Member of the House Financial Services Committee, Comptroller Thomas Curry, Senator Sherrod Brown who is Ranking Member of the Senate Banking Committee, Mark Morial, CEO of the National Urban League, and John Taylor, president and CEO of NCRC.

There were a number of sessions focused on reinvestment, affordable housing, small business lending, home ownership, gentrification, economic development, CDFIs, community health benefit agreements, fintech, rural development, fair housing, the racial wealth gap, the Community Reinvestment Act, redlining, and more, including a session entitled “Defending the CFPB” that Paulina Gonzalez, executive director of CRC, moderated.

In addition to attending the conference, CRC members also met with members of the California Congressional delegation and with bank regulators and their staff as well.  During the meetings, CRC members shared what they are seeing from their work in communities, specifically around issues related to small business lending, affordable housing and economic development.

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The president’s so-called “skinny budget” proposal was one of several topics covered at the meetings, and more background about the additional issues is included below.

Program/Department

Budget Proposal Impact on California

HUD Budget 

Eliminates CDBG, reductions for key programs serving renters Loss of $357 million in CDBG funds for CA cities;

$130 million in HOME funds for new affordable housing; Thousands of tenants to lose rental assistance vouchers;

More costs for Medicaid as seniors move to nursing homes w/o Meals on Wheels;

Increased homelessness;

CDFI Fund

Eliminated

Fewer loans, less support for Small Biz Owners. There are 86 CDFIs in CA that made 39,000+ loans in FY 2016.

Legal Services Corporation

Eliminated

11 CA orgs. receive funding through LSC.

Small Business Administration

Prime program defunded; Microloan program frozen Less financing available for CA small businesses.

NeighborWorks

Eliminated

Will harm efforts at building assets, including for 1st time homebuyers, also negative impacts for affordable housing.
AmeriCorps Eliminated

Work on tax returns, literacy, emergency response, health, and economic development.

 

Community Reinvestment Act

This year, CRA celebrates its 40th anniversary. Because of the CRA, financial institutions are helping to meet important community credit needs and building consumer and community wealth, through small business lending, mortgage lending, affordable housing finance, community development activity and bank branch and account access.

  • California Reinvestment Coalition members and other community groups have recently negotiated win-win community commitments with a number of banks, including City National, Bank of Hope, Cathay Bank and Mechanics Bank.
  • But bank regulators need to be more rigorous and timely in their CRA and Fair Lending examinations of banks. Wells Fargo had not had a CRA rating made public in 9 years, and several banks, such as BancorpSouth and Evans Bank that received Satisfactory CRA ratings were later sued for redlining.
  • Regulators should encourage banks to develop Community Benefit Plan agreements with local community groups, and incorporate these agreements into any bank merger approval and subsequent CRA exams.
  • Regulators should also provide CRA downgrades to institutions that engage in discriminatory, unfair, or deceptive practices, or that finance the direct or indirect displacement of low and moderate income people and communities of color, or that finance lenders who make predatory loans in these communities. Banks must diversify management and staff, and develop robust supplier diversity programs.


Rural Communities

Rural communities in California face unique and significant challenges. Banks are well placed to help local communities develop and grow through home mortgage and small business lending, affordable housing investments and low cost accounts.

  • But nonprofit groups and even some banks report that banks only lend and invest in geographic areas that are subject to “full scope” regulatory review (via CRA exams),  that tend to focus on larger, urban areas, especially for the largest banks.
  • Bank regulators should expand the number of full scope areas for banks that are among the biggest depositories and lenders in smaller, rural communities. Branch closings, especially in rural areas, are also effectively limiting access to banking for consumers.

Protect CFPB

The Dodd Frank Act and the creation of the Consumer Financial Protection Bureau are the most effective and publicly popular responses to the financial crisis.

  • The CFPB has secured over $12 billion in consumer relief, more than all of the other, relevant federal agencies combined.
  • The CFPB developed common sense rules that brought order and transparency to mortgages (Qualified Mortgage and QRM rules, home loan modifications (servicing rules, including successors in interest protections), and the collection of home loan data (HMDA rule).
  • Additionally, CFPB enforcement actions have protected consumers and communities from unlawful lending discrimination and unfair and deceptive practices.
  • Importantly, over 1 million consumers (including over 118,000 Californians) have already taken advantage of the CFPB’s user-friendly consumer complaint database to file complaints -some telling their stories – to seek relief but also to inform other consumers and CFPB enforcement officers about problematic practices and actors.
  • The CFPB’s Director, structure and authority must be vigorously protected.
  • Important CFPB rules on payday lending, prepaid cards, mandatory arbitration, debt collection and small business loan data must be finalized and protected from repeal.
  • We also support the CFPB’s work on issues that have important impacts on consumers, ranging from student loans to credit reporting agencies to financing for cars.

Small Business Lending

  • Small business lending has increased since Dodd Frank Act, not decreased as some Dodd Frank critics have suggested. But small business loans are still less available in LMI neighborhoods and neighborhoods of color
  • And many small business owners looking for credit from banks are relegated to higher cost and variable rate credit cards, not term loans.
  • 95% of the small business loans in CA from JPMorgan Chase Bank are credit card loans. While credit cards serve a purpose, they can come with higher costs, variable rates and are not well suited for the longer term capital needs that many businesses have.
  • Dodd Frank Section 1071 data would bring much needed transparency into who is receiving small business loans- and who is not. In the same way that HMDA data created greater transparency in the home lending market, 1071 small business data will shed light on small business lending trends, highlight disparities, and likely lead to increased lending.
  • Fintech, online, and marketplace lenders can present opportunity, but some are clearly also creating harm. CDFIs and community lenders are spending precious capital and staff time refinancing small business owners out of predatory fintech loans and merchant cash advances.
  • An Opportunity Fund analysis of 150 “alternative loans” found an average APR of 94%, and among Hispanic borrowers, the average monthly payment was more than 400% of take-home pay.
  • Advocates are concerned about a weakening of consumer protection under any OCC national fintech charter which will lead to preemption of state laws, and are concerned that the OCC has not shown itself to be a strong bank regulator (see, Wells Fargo).
  • We join Congressman Cleaver in raising concerns that fintech lenders are violating fair lending laws by not making good credit available to neighborhoods of color, that fintech algorithms may be biased, and that predatory fintech loans are destabilizing small business owned by women and people of color. The CFPB and other agencies must vigorously enforce fair lending laws against predatory and discriminatory fintech lenders. Bank partnerships with fintech lenders must be thoroughly scrutinized to ensure fair lending and consumer protection laws are followed
  • In addition to bank and fintech loans, small businesses are vulnerable to high cost products like Merchant Cash Advance and installment loans that can financially sink business owners instead of helping them.

Homeownership

Home loans are hard to come by in neighborhoods of color. Banks are increasingly focused on making jumbo loans which disproportionately benefit white borrowers, while making fewer loans to Latino and African American borrowers, and abandoning FHA loans in favor of their own, unproven products, with less than impressive results.

  • Any future GSE reform must maintain a duty to serve communities and retain affordable housing goals. Currently, Fannie and Freddie need to be held accountable to meeting ambitious affordable housing goals, and should offer more flexible products to qualified homeowners.
  • We are concerned about a return to redlining, and hope to see DOJ, CFPB and HUD continue their important work in enforcing fair housing and fair lending laws.
  • HUD is currently investigating CRC’s first HUD redlining complaint (more information and graphs below), filed against OneWest Bank for having few branches and making few home loans in neighborhoods of color in six Southern California counties.
  • Given our aging population, increased oversight is needed in the reverse mortgage market to ensure that seniors are not taken advantage of by loan originators and servicers.
  • CRC is deeply concerned that seniors are continuing to lose their homes unnecessarily due to servicer bureaucracy, a lack of strong oversight of this industry by HUD, and a very limited infrastructure to help seniors and their families avoid needless foreclosures.  The elimination of funding for Legal Aid organizations will exacerbate this problem.

Affordable Rental Housing

California continues to suffer from an affordable housing crisis. The California Housing Partnership Corporation estimates that California needs 1.5 million affordable homes to accommodate the state’s lowest income residents.

  • Any HUD budgets cuts to key programs such as HOME, CDBG, Rental Assistance and Low Income Housing Tax Credits, could be devastating.
  • California nonprofit housing developers report that many investors, including banks subject to the Community Reinvestment Act, are pulling back from existing commitments in tax credit deals and attempting to renegotiate terms in light of pending tax reform. The result is fewer units produced and more subsidy coughed up at the 11th hour by desperate nonprofits who then must forego developer fees, and local governments which must contribute additional, unplanned subsidies.
  • Banks should receive CRA rating downgrades for such behavior as well as for seeking community development lending credit for loans that foreseeably lead to displacement of low and moderate income residents the CRA was meant to benefit.
  • CRC is deeply concerned about Fannie Mae’s recent commitment to guarantee up to $1 billion in debt backed by single family rental homes owned by private equity giant Blackstone.
  • Fannie Mae and Freddie Mac must continue to invest in the National Housing Trust Fund and Capital Magnet Fund.
  • Importantly, HUD must continue to implement Affirmatively Furthering Fair Housing obligations and assist local jurisdictions in meeting critical housing needs, fighting displacement and creating access to areas of opportunity for all.

Immigrant Access

The current political environment, with its changing policies and harsh rhetoric is threatening to drive immigrant communities out of the country, or out of sight. A recent CRC survey of confirms that many of our organizational members are seeing clients go underground, fail to show up for jobs, and forego access to needed services because they are concerned about ICE.

  • Bank regulators and banks should work together to clarify and simplify the privacy data rights of immigrants so they will not fear that banks will share their private data with the government.
  • Banks should also be encouraged to lend directly to qualified immigrant homeowners and small business owners who may have ITIN numbers, as well as invest in CDFIs and community lenders that make such loans.
  • For banks serving large immigrant populations, they should consider what information may be helpful to share with their customers about power of attorney and other bank access issues should a household member face deportation.

Payday lending

Payday lending continues to be a scourge on working families, charging 400% APR for short term loans that trap unsuspecting consumers in cycles of debt.

  • The CFPB has designed well considered and reasonable rules to protect consumers against abuses.
  • Federal intervention is needed as payday lenders and lobbyists have a stranglehold in Sacramento.
  • Banks should be incentivized to continue to develop small dollar alternatives to such products and to assist CDFIs and other community lenders that seek to fill this niche, and should also be penalized in their CRA exams for any financing to high-cost, predatory lenders.

Overdraft

According to the CFPB, the majority of overdrafts are on transactions of $24 or less and are repaid within 3 days or less. The CFPB calculated that with a median overdraft fee of $34, this is equivalent to a loan with a 17,000 APR.

  • It is telling that payday lenders defend their triple digit APR loans by saying consumers are merely making informed decisions to take out payday loans because they are less expensive than overdraft fees.
  • Banks continue to overly rely on overdraft fees as a source of fee revenue, to the detriment of their clients. CFPB rules on abusive overdraft policies are important, and all regulators should independently examine the impact of overdraft on bank customers, and work with their banks to end this product.

 

More on CRC’s Redlining Complaint Against CIT Group

Redlining Complaint Against OneWest Bank filed by California Reinvestment Coalition

Mortgage lending in 2015 (CRC)

The complaint alleges that OneWest Bank’s lending to borrowers in communities of color is low in absolute terms, low compared to its peer banks, and is lower than one would expect, given the size of the Asian, African American and Latino populations in Southern California.

Branch locations OWB

As part of the complaint, an analysis of the bank’s assessment areas found that OneWest has only 1 branch in an Asian majority census tract, no branches in African American majority census tracts, and 11 branches in Hispanic majority census tracts.

Branches in Asian, African American, and Hispanic majority trats (OWB)

While OneWest’s foreclosure record is not part of the redlining complaint, analysis by CRC and Urban Strategies Council found that OneWest was nine times as likely to foreclose in communities of color as compared to extending mortgage loans in communities of color.

OWB foreclosures vs originations

How Much Money Does Wall Street Spend on Lobbying and Campaign Contributions?

occupy-wall-street-political-cartoon-lobbyists

Political cartoon by Mike Luckovich, Atlanta Journal Constitution

A new report from Americans for Financial Reform provides a troubling window into the amount of cash pouring into Congress from Wall Street since the 2008 crisis -it’s over $2.7 million a day, and more than $3.7 million per member of Congress!

Wall Street Money in Washington,” is a 62-page examination of political spending, draws on a special data set compiled by the Center for Responsive Politics for AFR in order to provide a more precise look at financial industry spending than is otherwise possible.

Campaign Contributions: $1.2 billion. Individuals and entities associated with financial reported making $1,201,417,199 in contributions to federal candidates for office during this election cycle. The financial sector’s contributions were almost twice that of any other specific business sector identified in the data. Of the $688,150,613 in party-coded contributions by PACs and individuals associated with finance, 55% went to Republicans and 45% went to Democrats.

Five U.S. Senators and two House members were among the biggest Congressional recipients of financial sector contributions. Sen. Marco Rubio (R-FL) topped this list with $8,687,969. The other senators were Ted Cruz (R-TX), with $5,482,011; Charles Schumer (D-NY), with $5,345,563; Rob Portman (R-OH), with $4,158,259; Pat Toomey (R-PA). Members of the House of Representatives were led by House Speaker Paul Ryan (R-WI), with $5,727,069; and House Majority Leader Kevin McCarthy (R-CA), with $3,397,980.

Lobbying: $898 million. The financial industry reported spending a total of $897,949,264 on lobbying in 2015 and 2016. This puts the sector in – close – third place, behind the Health sector, which spent $1,022,907,176, and a category of “Miscellaneous Business,” a sector that that itself probably includes some Wall Street lobbying by business groups with a broader focus than only finance.

Since 2008, the financial services industry has spent more money on contributions and lobbying than it did before the crisis, and the total in this cycle is the highest yet. 

“The entire apparatus of government operates in an environment flooded with millions of dollars in Wall Street cash on a daily basis,” said Lisa Donner, executive director of Americans for Financial Reform. “If you want to understand why finance too often hurts consumers, investors and businesses far from Wall Street, take a look at these numbers.”

You can read the whole report on the Americans for Financial Reform website. 

 

Watch a Screening of “The Ordinance” with Stop the Debt Trap LA on Feb 22nd

Join Stop the Debt Trap LA on Wednesday, February 22nd from 2 – 4 pm for a screening of “The Ordinance” documentary film, followed by a short campaign briefing and planning meeting. the-ordinance

With billionaires, racists and Wall Street executives running the country, our communities are especially vulnerable.

Come learn more about how we’re organizing locally to shore up protections for consumers and communities against predatory lenders.

“The Ordinance” is a new short film focused on the fight to reform predatory lending in Texas, and the role that local communities, faith leaders and policy makers played in putting out the “not welcome” mat to financial predators in their community.

Much like in California, the Texas legislature is partial to the payday loan industry, and legally allows for abusive triple-digit interest rate lending. In Texas and in California, communities are fighting back and organizing to pass local policies in their cities to stop the growth of these industries and send a strong message to state and federal policy makers that enough is enough!

Come learn more about the local movement against predatory payday and car title lenders, and how you can get involved in our advocacy campaign!

Light refreshments will be provided.

Please RSVP either on CRC’s Facebook page, or by emailing Liana Molina.

If you have any questions or would like more information, contact Liana at liana@calreinvest.org

You can watch the trailer for the movie by clicking here.

California Lawmakers Call on CFPB for Stronger Payday Lending Rule

Payday Lenders

Have you heard?  After decades of abusive lending practices by payday, car title, and high-cost installment lenders, a federal agency, the Consumer Financial Protection Bureau (CFPB) will be releasing a new rule to better protect borrowers who use these loans.

The Center for Responsible Lending (CRL) and California Reinvestment Coalition (CRC) applauded California members of the U.S. Senate, U.S. House of Representatives, California State Legislature, city and county officials, and California Attorney General Kamala Harris who all sent official statements to the CFPB, calling on the bureau to strengthen an earlier, draft version of the rule.

In their letters, California lawmakers and attorney general highlighted that the proposed rule is a step in the right direction, but  that more needs to be done to ensure borrowers are not trapped in a cycle of debt by these predatory loans.

In California, payday lenders typically charge 366% APR on a $300, two-week loan.

Payday lenders and high cost lenders are also offering loans of $2,500 and above at 100% or higher  APRs. Consumers are especially vulnerable to this abusive practice as California does not have an interest rate cap for loans greater than $2,500.

“As elected representatives, we respectfully urge the Consumer Financial Protection Bureau to issue a strong federal payday lending rule that puts an end to the payday, car title, and high-cost installment loan debt trap nationwide” the legislators wrote.

“These high-cost unaffordable loans are detrimental to any community, but have a disproportionate impact on our African American and Latino neighborhoods. In California, payday lenders are twice as likely to be located in communities of color than in white communities, even after accounting for income. The core principle of CFPB’s proposal is the right approach—requiring lenders to ensure that a loan is affordable without having to re-borrow or default on other expenses. However, some of the details must be strengthened in order for this approach to truly work and protect Californians from predatory lenders.”

Payday lenders have invested in efforts to ward off state laws and federal regulations that would protect consumers. Some members of the California State Legislature, including California Assemblyman Ian Calderon (District-57) have pushed to weaken regulations against payday and car title lenders by calling on the CFPB to go light on rules that prevent abusive financial practices.

“This rule will create the first nationwide regulatory floor for the payday lending industry, while maintaining the prerogative of states to further strengthen their consumer protection laws and regulations as they see fit.” the attorney general wrote. “I strongly support the Bureau’s proposal to require a meaningful “ability-to-repay” standard and to curb collection abuses, as well as its proposals for structural protections to help protect consumers from being trapped in long-term, unaffordable debt.”

“Payday and car title lending significantly harm borrowers and their families. They lead to financial consequences, such as bank penalty fees, loss of cars, and bankruptcy. It’s discouraging to see that some members of the state legislature have aligned themselves with payday lenders instead of putting the interests of California families first.” explained Center for Responsible Lending Director of California Policy Graciela Aponte-Diaz. “We commend the members and the attorney general for their leadership and standing up against the payday lending industry.”

“For years, payday lenders have siphoned money out of the pockets of Californians who can least afford it,” said California Reinvestment Coalition Director of Community Engagement Liana Molina. “We applaud our state elected officials for standing up for responsible lending and we join them in urging the CFPB to finalize a rule that will protect borrowers.”

California state legislative members who signed the comment letter were:

Senators Bob Wieckowski, Mark Leno, Senator Fran Pavley, Hannah-Beth Jackson, Mike McGuire, Benjamin Allen, and Carol Liu; and Assembly Members Mark Stone, Patty Lopez, Philip Ting, Susan Talamantes Eggman, and Susan Bonilla.

The following local policymakers also called for a stronger payday lending rule:

Berkeley City Councilmember Jesse Arreguin, Menlo Park Mayor Rich Cline, Oakland Mayor Libby Schaff, San Jose Mayor Sam Liccardo, Roseville Mayor Carol Garcia, the Los Angeles County Board of Supervisors, San Mateo County Board of Supervisors President Warren Slocum, and Santa Clara County Supervisor Ken Yeager.

Additionally, U.S. Representative Maxine Waters led a group of more than 100 Congressional members in sending a comment letter to the CFPB Director calling for a stronger payday lending rule.

The California Congressional delegation members who signed the comment were: Peter Aguilar, Karen Bass, Xavier Becerra, Ami Bera, Judy Chu, Mark J. DeSaulnier, Anna G. Eshoo, Sam Farr, John Garamendi, Janice Hahn, Mike Honda, Jared Huffman, Barbara Lee, Ted W. Lieu, Zoe Lofgren, Alan Lowenthal, Lucille Roybal-Allard, Linda T. Sánchez, Jackie Speier, Mark Takano, Juan Vargas, and Maxine Waters.

Both U.S. Senators from California, Senators Dianne Feinstein and Barbara Boxer, have also signed on to a letter urging CFPB for a stronger rule.

CRL and CRC have consistently fought against abusive predatory lending practices across California. Recently, CRL and CRC sent comments to CFPB calling for the Bureau to end the payday lending debt trap and close off paths to evasion for predatory payday lenders. Read CRL’s letter here and CRC’s letter here.

As part of its rulemaking process, CFPB released its proposed rule on June 2, 2016, and has since received public comments from families, communities, and organizations. The final day for public comment was on October 7, 2016. The CFPB is expected to make its final decision on the regulations in 2017.

2015 Payday Loan Statistics for California

Editor’s note: The Consumer Financial Protection Bureau is finalizing new rules for payday, car title, and high-cost installment loans. They want to hear from YOU about your experiences and recommendations for the loans. Please take two minutes to provide your insights here. 

California Payday Lending Statistics

1) Total Number of loans:  Approximately 12.3 million loans were made in California in 2015 and the aggregate dollar amount of the loans was about $4.2 billion.

2) Average number of loans and average APRs: The average number of loans per customer was 6.5, paying an average APR of 366% (average APR increased 5% from 2014).[1]

3) Repeat borrowers and “churning” of loans: Contrary to loans being advertised as a “one time fix for emergencies” the number of Californians who obtained 10 payday loans (462,334) was far greater than the number who only had one loan (323,870). Subsequent transactions by the same borrower accounted for 76% of the total number of loans made in 2015 with 47% of subsequent loans made the same day a previous loan transaction was paid off and another 23% happening within 1-7 days.

CA DBO new report number of transactions

Graph is from CA Dept. of Business Oversight Report on 2015 Payday Lending Statistics

4) Churning profits: 64% of fees in 2015 ($53.53 million) – came from customers who had seven or more transactions during the year.

Fees collected

Graph is from CA Dept. of Business Oversight Report on 2015 Payday Lending Statistics 

5) Repossessions: 16,989 car title loans resulted in the consumer’s car being repossessed in 2015.[2] At the national level, the CFPB has found that 1 in 5 car title loans ultimately results in a repossession.[3]

6) Fees: California payday loan consumers pay over $507 million annually in payday loans and over $239 million in car title loans.  This ranks California in the #2 spot for highest amount of fees paid for car title and payday loans.[4]

7 Economic drain: Payday lending is an estimated $135 million net drain on California’s economy every year and subtracts 1,975 jobs.[5]

Customers age

Graph is from CA Dept. of Business Oversight Report on 2015 Payday Lending Statistics on ages 

The California Reinvestment Coalition builds an inclusive and fair economy that meets the needs of communities of color and low-income communities by ensuring that banks and other corporations invest and conduct business in our communities in a just and equitable manner.

You might also be interested in these payday lending posts:

Editorials Against Payday Lenders (As of July 2016, there’s been more than 150 editorials written from around the country about the financial harm caused by these lenders).

Payday Lender Hall of Shame This industry is known for spectacularly shady practices against its consumers. We’ve compiled some of the worst.

8 Reasons Not to Get An Online Payday Loan Is that really a lender’s website you’re on?  Or is it a broker who will re-sell your sensitive information repeatedly?

Data Sources:

[1] CA Dept. of Business Oversight press release, available at: http://www.dbo.ca.gov/Press/press_releases/2016/2016%20CDDTL%20Annual%20Report%20and%20Industry%20Survey%20Press%20Release%2007-06-16.pdf

[2] CA Dept. of Business Oversight 2015 CFLL annual report, available at: http://www.dbo.ca.gov/Licensees/Finance_Lenders/pdf/2015_CFLL_Aggregated_Annual_Report_FINAL.pdf

[3] Consumer Financial Protection Bureau press release, available at: http://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-one-five-auto-title-loan-borrowers-have-vehicle-seized-failing-repay-debt/

[4] Center for Responsible Lending report, available at: http://responsiblelending.org/sites/default/files/nodes/files/research-publication/crl_statebystate_fee_drain_may2016_0.pdf

[5] Insight Center for Community Economic Development report, available at: http://ww1.insightcced.org/uploads/assets/Net%20Economic%20Impact%20of%20Payday%20Lending.pdf

The CFPB’s Impact in California

Have you heard? Yesterday was the 5th anniversary of the Consumer Financial Protection Bureau.  In that short time, the agency has built a reputation for dramatically increasing transparency into the financial services market, leveling the playing field between consumers and financial corporations, and putting bad actors on notice that they will face consequences.

bday cake

Senator Elizabeth Warren is widely credited with the idea of an agency that would stand up for financial consumers, and the CFPB was included in the Dodd Frank financial reform that was passed in response to the mortgage meltdown.

While advocates had repeatedly warned federal and state regulators and elected officials about the predatory mortgages that were being made, these warnings fell on deaf ears.

IMG_4294

Predatory loan advertising

In the summer of 2013, CRC and our allies urged the US Senate to confirm Richard Cordray as director of the CFPB and we were happy to see that he confirmed on July 16, 2013.

CFPB confirm!

CRC and our allies delivering over 25,000 petitions from Californians, urging the US Senate to confirm Richard Cordray.

Since then, Cordray and his CFPB colleagues have been busy!

In an April snapshot about California and complaints submitted by Californians, the CFPB reported:

1) As of April 1, 2016, Californians had submitted 118,900 of the total 859,900 complaints the CFPB had received at that point, or about 14%.

2) Complaints from Los Angeles and San Francisco accounted for nearly 50% of these complaints.  (CRC won’t claim credit for all of the San Francisco complaints, but we receive a fair amount of phone calls from harmed consumers and we frequently suggest making a complaint to the CFPB if it is accepting complaints for that particular product.  Not only does this hopefully lead to redress for the affected consumer, but it also helps the CFPB to see if there are concerning trends- for example if a lot of consumers are complaining about a particular company or product).

3) Speaking of “lots of complaints about a particular product,” mortgages were #1 most complained about product in the April snapshot, accounting for 32% of complaints.  In fact, complaints from California were more likely to be about mortgages as compared to the number of complaints made about mortgages at the national level (about 26%).

4) Debt collection was also frequently complained about, representing 24% of all California complaints, as compared to 26% nationally.

5) Most complained about companies: The CFPB received the most complaints from California consumers about Bank of America, Wells Fargo and Experian.

We’re including five examples of how the CFPB has stood up for consumers below:

1) Stopping Illegal Harassment of Payday Loan Borrowers: The CFPB has stopped companies from engaging in illegal and predatory behavior- like Ace Cash Express illegally harassing their customers into rolling over their payday loans. In announcing the settlement, Director Cordray explained: “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back.”   Take a look at this graphic from the CFPB’s settlement with Ace Cash Express.  It’s from their new employee training manual and provides a clear diagram on how Ace tried to keep its borrowers caught in the payday loan debt trap:

ACE Cash Express

2) Targeting Enablers Too: The CFPB doesn’t just target bad actors, it also targets companies that enable bad actors- like this California based lead generator (D and D Marketing, doing business as T3Leads (T3)) that sold consumer loan applications as “leads” to small-dollar lenders. The CFPB explained that “T3 failed to vet or monitor its lead generators and lead purchasers, exposing consumers to the risk of having their information purchased by actors who would use it for illegal purposes. T3 allowed its lead generators to attract consumers with misleading statements and took unreasonable advantage of consumers’ lack of understanding of the material risks, costs, or conditions of the loan products for which they apply. T3’s conduct was unfair and abusive….”

To understand why online lead generators can be so bad for customers, take a look at this NPR Story: I applied for an online payday loan: here’s what happened next.

3) Loan Modification Scam Artists: In some ways, California was ground zero for the mortgage meltdown, especially since many of the most predatory lenders (like Countrywide) were headquartered in Southern California.  Since the mortgage meltdown, more bottom-feeding vultures have emerged, preying on desperate homeowners with promises of costly loan modifications that never materialize.  In July 2014, the CFPB, FTC, and state regulators announced a sweep against these scam artists.  The Bureau filed three lawsuits against these companies and individuals who had collected more than $25 million in illegal fees for services that were never delivered.  California was also “well-represented,” with a number of these scam artists located in our state. The CDPB’s complaint alleged that one of these firms,  Clausen, Cobb, and CCMC “managed, staffed, and supported the deceptive loan modification operations of Stephen Siringoringo’s southern California law firm. The State Bar of California initially referred the misconduct to the CFPB.”

4) Predatory Mortgage Loan Servicing: The CFPB hasn’t only gone after scam artists- it’s also worked to stop companies who are cutting corners and hurting their customers in the process.  One such company is Ocwen, a mortgage loan servicer.  In 2013, the CFPB announced a $2 billion settlement against Ocwen for “systemic misconduct at every stage of the mortgage servicing process.”  The settlement also covered homeowners with loans from Litton (a servicer formerly owned by Goldman Sachs who had also received low marks for the way it treated its customers) and Homeward Residential Holdings LLC (formerly American Home Mortgage Servicing Inc.).

5) Protecting Mortgage Customers: During the “Wild West” days of mortgage lending leading which later caused the mortgage meltdown, lenders routinely rewarded their staff members for putting customers into more expensive mortgages.  Surprisingly, this practice was allegedly still in place at RPM Mortgage, according to a 2015, $19 million settlement with the CFPB.

If you’d like to learn more about the CFPB, check out these resources:

Consumers Count: Five years standing up for you

CRC Hosts CFPB Mission District Tour on Small Business Displacement

Cover Picture

Liana Molina discusses displacement of local small businesses at the corner of 16th and Valencia in the Mission District, San Francisco

Yesterday, CRC hosted a visit and tour by the Consumer Financial Protection Bureau (CFPB) in the Mission District in San Francisco.  CFPB Director Richard Cordray and Assistant Director Grady Hedgespeth met with local small business owners and leaders from CRC member organizations including MEDA, Opportunity Fund, and Renaissance Entrepreneurship Center who support small businesses with capital and technical assistance.

Displacement in the Mission

In the past few years, growth in the tech sector has created enormous pressure not just on housing rents in the Bay Area, but on commercial rents as well.

The displacement of neighborhood serving small businesses in the Mission is especially troubling, given the critical role they play in supporting, serving and employing longtime residents of the Mission.  Small business owners have also complained about difficulty they face in obtaining bank loans, and research by CRC confirms that small business lending by the five largest banks has dropped dramatically since the recession.

Under the Dodd-Frank financial reform, the CFPB is charged with collecting data about small business lending.  In February this year, the CFPB announced that writing these rules is considered a near term priority goal. Similar to the Home Mortgage Disclosure Act, these new rules are expected to increase transparency (and accountability) about who is getting small business loans- and who isn’t.

Small business owners share their experiences and challenges

Director Cordray and Assistant Director Hedgespeth met with several of these small business owners during the CFPB’s visit.  The first stop on the tour was Venga Empanadas, where co-owner Pablo Romano shared his experience in obtaining financing to open his restaurant.  Denied financing by a bank, Mr. Romano connected with Opportunity Fund, a Community Development Financial Institution (CDFI) who provided him with a $45,000 loan, enabling him to sustain and grow his business which now has eight employees.

D'Maize

Luisa Estrada, owner of D’Maize Restaurant and Catering speaks with Director Cordray.

Next, Zenaida Merlin and Luis Estrada, owners of D’Maize Restaurant and Catering, shared how a small business loan of $80,000 from Mission Economic Development Agency’s (MEDA) new CDFI Adelante loan fund meant that D’Maize was recently able to expand their business to a full-service restaurant.  They now employ 22 people from the local community.

Elsa Valdez, the owner of El Salvador Restaurant, explained how she benefitted from working with MEDA, who helped her to get a loan from KIVA to help pay for improvements to her restaurant, which has been family owned for over 20 years.  Ms. Valdez wants to continue improvements to the restaurant and growing her business.

Paula

Paula Tejada, owner of Chile Lindo Delicatessen and Coffee Shop

Paula Tejada, known as “The Girl from Empanada” is the owner of Chile Lindo Delicatessen and Coffee Shop, a business she first purchased in 1995.  Working with Renaissance Entrepreneur Center, she received technical assistance on running her business, including their 14 week business planning class focused on marketing, management, operations and finance.

Lunch at San Jalisco

The tour concluded with lunch at San Jalisco, owned by Dolores “Josie” Padilla-Reyes.  She took over the restaurant from her parents in the 1970s, but after rent was increased threefold, she had to close the café and reopen the eatery in its current location.  Concerned about being displaced again, she worked with the Mission Economic Development Agency (MEDA) to secure a loan to purchase her building, preventing further displacement.

Len Rogers, the owner of the Electric Bicycle Superstore, also joined the lunch.  He launched his small business in 2008 and it has grown steadily since then.  Len was denied by multiple banks for credit, making him a perfect target for expensive merchant cash advance companies. After struggling with unsustainable payments required by multiple predatory finance companies, he connected with Opportunity Fund, who refinanced him into an affordable, responsible small business loan.  Len was also a client of Renaissance Entrepreneurship Center, who helped him get a KIVA loan and provided consulting services through their Bayview Office.

cake2

The lunch concluded with a “Happy Birthday” cake presented to the CFPB staff, since yesterday was the Bureau’s fifth birthday. In that short time, the agency has secured over $11 billion in relief for over 27 million consumers and handled nearly 1 million complaints.

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