New Payday Loan Facts in California

Did you hear that the Consumer Financial Protection Bureau is finalizing rules for high-cost payday, car title, and installment loans?

If you’re curious to know more about these loans, and the impact they have (mostly negative) on Californians and our state economy, then you’ll want to read CRC’s new fact sheet on payday lending in California.

It includes the latest data from the California Department of Business Oversight, as well as research on the negative drag to California’s economy created by payday loans.

california-payday-loan-brochure

 

 

You can download the fact sheet by clicking here.

If you want to learn more about payday loans in California- and the work the California Reinvestment Coalition is doing to take on predatory lending, click here and visit the CRC website.

Advance America Payday Lender Settlements

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

As the payday, car title, and installment loan industry is trying to fight the upcoming CFPB regulations, one of the claims they try to make is that store-front locations offering loans are far more legitimate and far less likely to take advantage of customers as compared to online lenders. We’ll agree that online lenders are also shady (read our post here:  8 Reasons Not to Get an Online Payday Loan)

Let’s examine this claim that storefront lenders are less shady.  First, it’s impossible to ignore the predatory rates they charge their customers, and the fact that 4 out of 5 of their customers are forced to renew their loans because the loan repayment terms are unrealistic.  These loans are allowed to be offered this way in many states because the industry has been so prolific at bribing…er…investing…er….making campaign contributions to state legislators who write the rules.  And, the industry has a well-documented history of using questionable smear tactics to defeat state legislation that would better protect consumers.

Put aside their bad products that are legal but predatory, and let’s move onto the claim that all storefront payday lenders follow the rules.  It turns out, that’s not the case either.  In fact, some car title, and instalmment lenders also don’t follow state laws, and as a result, are forced to settle with regulators and with attorneys who sue them.

In our first edition of “Payday Lender Law Breakers,” we’ll take a look at Advance America and its checkered history of settlements.

Shark payday 2

 There’s been a lot of them, so if we missed one, let us know in the comments section!

2015: State of Pennsylvania $22 million settlement: According to Lancaster Online, under this settlement, Advance America will pay $8 million in restitution, forgive unpaid balances of about $12 million, and pay another $2 million to the state for legal costs in administering the settlement.  Read more here: Payday lender Advance America to return $8M to Pa. consumers in settlement

2010: Missouri: Advance America agrees to settlement worth at least $5.8 million in cash and debt forgiveness to a class of Missouri residents.  Read more here: Payday Lender To Shell Out $6M In Class Settlement

2010: North Carolina: Advance American agrees to $18 million settlement in North Carolina: Read more here: Payday Loan Lawsuit Brings $18 Million Settlement Against Advance America

2010: South Carolina: Advance America part of $2.5 million lawsuit in South Carolina against payday lenders. Read more here: Payday Loan Class Action Settlement

2009 California: State of California Dept. of Business Oversight Settlement: In 2008 the Department conducted regulatory examinations of various Advance
America locations.  The examinations cited purported violations of the CDDTL, including that Advance America allegedly collected excess amounts from customers that made partial payments on their loans, allegedly collected NSF fees on returned checks that were deposited after customers made partial payments on their loans, allegedly failed to refund finance charges to customers that paid off their loans the next business day following origination, and allegedly conducted deferred deposit transactions at an unlicensed location (hereinafter collectively “Exam Findings”). Advance America disputes and denies the Exam Findings.  Read more here: State of California Settlement Agreement and Desist and Refrain Order

2009: Georgia Settlement: Press release: Advance America Announces Settlement in Georgia and the Closing of 24 Centers in New Hampshire

2009 Arkansas Settlement: Read more here:  http://www.stoppaydaypredators…

 

CRC resources on predatory payday, car title, and installment lending

Share Your Story about payday, high cost installment, or car title lending- It only takes 3-5 minutes. By sharing your experience, you can help take a stand against predatory lending and help the CFPB understand why consumers need strong rules to limit predatory loans.

Editorials Against Payday Lending Newspapers around the country are weighing in!  Check out this extensive compilation of 109 editorials (and counting!) against the debt traps created by payday and other high cost loans:

Payday Lender Hall of Shame: If you thought payday lenders are here to help, read this shocking expose of their worst practices.  Some truly shocking behavior!

North American Title Loans Repossess Car from Injured Consumer.  Watch this PBS NewsHour segment about TJ McLaughlin, whose car was repossessed after he couldn’t make payments because of a health problem.

Here’s 7 Reasons Payday Lenders Are Worried About Their Profits

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

Payday Pay to Play

1. They’re spending a LOT of money on politicians BUT money can’t always buy you love

The payday lending industry has always “invested” gobs of money in politicians and elected officials as a way to fight off state-level regulation.  According to a new report from Americans for Financial Reform, the industry must be really worried. They spent over $15 million in campaign contributions during the 2013-14 campaign cycle. Some notable recipients include Representative Debbie Wasserman Schultz from Florida who received $31,250.  Wasserman Schultz later signed onto a letter with her Florida colleagues, suggesting that the CFPB shouldn’t make payday lending rules too restrictive.  In response, more than 20 Florida organizations that actually work with people who use payday loans (and see the damage caused by them), wrote a letter to the Florida delegation, reminding them that contrary to the marketing of these loans, the reality is that 63% of payday loan customers in Florida take out 12 or more loans each year.

 2. Regulators are clamping down on their illegal practices:

“A huge payday lending operation based in Kansas City will be banned from offering any more loans under a $54 million settlement announced by federal regulators Tuesday.”  Firms accused of faking loans, draining bank accounts settle with feds

“The Consumer Financial Protection Bureau (CFPB) is suing the NDG Enterprise, a complex web of commonly controlled companies, for allegedly collecting money consumers did not owe. According to the agency’s complaint, the defendants illegally collected loan amounts and fees that were void or that consumers had no obligations to repay, and falsely threatened consumers with lawsuits and imprisonment.”  Offshore payday lender hit with CFPB lawsuit

And, World Acceptance, one of the shadiest lenders out there, also recently shared that the CFPB is investigating it: This Payday Lender Is Being Investigated by the CFPB, and the Stock Got Crushed

3. People don’t like payday loans, in fact, 75% of people want stronger regulation of them.

The more that people learn about payday loans, the more they support regulation of them.  For example, a recent survey by the Pew Charitable Trusts finds that 75% of respondents believe there should be more regulation of payday loans.  This is an increase from 72% of respondents surveyed in 2013.
Did we mention that there have been 95 newspaper editorials written AGAINST payday lending in the past year and a half?

 

4. The gloves are off in exposing payday loan financiers

 The HuffingtonPost broke the story that a new project run by Allied Progress will expose secrets of the payday lending industry- and who profits from it:

“We’re going to do the hard work to expose who these people are and their links to some big corporations and individuals who would prefer to stay in the shadows,” said Frisch. “We’re looking at all types of predatory lending, payday loans, car titles, check cashing, bank fees. Nothing is off the table, both nationwide and in the states, if we see that we can make an impact.”

Read more here: New Project Seeks To Unmask Shadowy Payday Lenders

Another excellent resource for unmasking the folks that profit off of the payday loan debt trap and other shady companies is a website created by Unite Here, called “Loan Shark Funds”, nicknamed after the “Lone Star Fund” that is investing in payday lenders like DFC Global, which it purchased in December 2014.

Take a look: LOAN SHARK FUNDS website:

Lone Shark Funds

5. Companies are heading for the exit doors

Some companies like EZ Corp are seeing the writing on the wall.  The more people learn about payday, car title, and high cost installment loans, the less they like them.  The company announced in July 2015 that it is no longer going to originate payday, car title, or high cost installment loans.

6. Payday Money = Dirty Money  (can somebody please tell the politicians?)

Money made off of putting people in a payday loan debt trap is dirty money.  Take a look at this private school that announced it was returning donations from a payday loan company that is part of a settlement with federal authorities.

7. Banks don’t want to aid and abet this predatory profit model anymore

In this case, it’s a bank in Australia: “Westpac pulls out of funding payday lenders

According to a recent report from our allies Reinvestment Partners, (Connecting the Dots: How Wall Street Brings Fringe Lending to Main Street) there’s still some banks in the US that are willing to fund payday lenders.

Some of the largest banks include:

Wells Fargo ($WFC)

Bank of America ($BAC)

US Bank ($USB)

Capital One ($COF)

Read the report to see more excellent graphs and information like this one:

Wells Fargo Funding High Cost Consumer Loans

 

Did you like this post?   Check out a few of our other most popular payday lending posts:

95 Editorial Against Payday Lenders

CFPB Field Hearing in Richmond, Virginia Summary

The Payday Lender Hall of Shame

 

New CFPB Study on Reverse Mortgage Ads find Many Contain Confusing, Incomplete, and Inaccurate Statements

Fred Thompson vs. new CFPB study

Picture of former Senator Fred Thompson in reverse mortgage advertisement

“When it’s a former Congressman endorsing it, it makes it sound like a good idea.” -consumer discussing reverse mortgage advertisements and celebrity spokespeople.

Earlier today, the CFPB released a study that examined advertisements for reverse mortgages.

They found:

Among the advertisements we collected, on their face, many contained confusing, incomplete, and inaccurate statements regarding borrower requirements, government insurance, and borrower risks. Furthermore, after viewing ads in our focus groups, many consumers were confused or had misconceptions about important features and terms of reverse mortgage loans. For example, some consumers struggled to understand that reverse mortgages are loans that must be repaid with interest. Consumers also often misinterpreted the role of the federal government in the reverse mortgage market as providing consumer protections that are not actually offered.

If you’re a regular follower of CRC, you know that we’re opposing the CIT Group and OneWest merger, and one of the issues that has come to light is the reverse mortgage servicing subsidiary of OneWest bank, innocuously named “Financial Freedom.”

At a Federal Reserve hearing held in February 2015 in Los Angeles, dozens of people and organizations testified against the merger.  A number of the people who either spoke or submitted testimony cited their incredibly difficult times trying to work with Financial Freedom, especially after the death of a loved one.

The issue of surviving spouses facing foreclosure due to a reverse mortgage that was originated solely with their deceased spouse has come to light thanks to a class action lawsuit by AARP against HUD for turning a blind eye to reverse mortgage brokers and companies originating these loans to only one spouse, with the implicit suggest that the often younger, often female spouse, wouldn’t face foreclosure and/or could be added to the loan later.  Now, these widowed homeowners are facing foreclosure.

HUD released a policy in January 2015 to address this issue, but most experts predicted it would be useless for the very people it was supposed to help.  In April, HUD rescinded the policy, but what about the homeowners who are potentially facing foreclosure?

Take a look at the testimony by Karen Hunziker, who is a surviving spouse, facing foreclosure.  Does this sound like a helpful loan servicing department, especially if you’re a grieving spouse?

Additionally OWB has failed to provide a Single Point of Contact. This creates a communication maze impossible to navigate for the consumer to get customer support or guidance.

One day, I called 5 times to verify I received the 90 day extension OWB promised in writing. I spoke to 5 different people all with a different story. In part, I was told:

• OWB didn’t receive the documents faxed multiple times,
• The documents needed to be reviewed by their legal department,
• I had to call back in 5 days
• I used up all my extensions.
• I didn’t get the documents in on time,
• The last person told me my property was scheduled for auction in 30 days.

At all times OWB refused to put any phone conversation in writing.

For more background on this issue, read these two articles.

Will grandma get run over by HUD’s reverse mortgage policy?

New Reverse Mortgage Policy Leaves Widows and Widowers Homeless

If you’re an attorney working with a surviving spouse facing foreclosure due to a reverse mortgage, or if you’re a surviving spouse facing foreclosure, please contact CRC if you’d like to join in advocacy on this issue. We are NOT able to represent you as an attorney, but we would like to have you join in our advocacy to bring greater attention to this problem and how it is affecting widowed homeowners.

 

 

8 Important Points from the CFPB Field Hearing on Payday Lending in Richmond Virginia

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

 

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

Did you miss the CFPB hearing on payday and other high cost loans?  Not to worry, advocates and consumers from around the country testified at the hearing about their experiences with payday and car title loans and we’ve got the highlights below!

1) Ending predatory lending is a top priority of the CFPB and of President Obama: President Obama signaled the importance of putting an end to predatory lending in a speech he gave Thursday in Birmingham, saying, “As Americans, we don’t mind folks making a profit,” Obama said. “But if you’re making that profit by trapping hardworking Americans in a vicious cycle of debt, then you need to find a new business model. You need to find a new way of doing business.”

Watch President Obama’s speech here (payday lending starts at about 15 minutes in):

 

2) When consumers share their stories about payday and car title loans, it isn’t pretty:

ELLIOTT CALLOUT EMAILIt started with a broken ankle and a $500 payday loan. It ended in a three-year ordeal that cost Elliott – a Marine Corps veteran – his wife, and five daughters more than $30,000 and their house…read more here from the PICO National Network.

From a Guardian article about hearing: “I would tell anyone at this point: don’t do it. Do not do it. If I had known what I know now about payday loans, I never would have looked their way,” he said.   The Guardian: Payday loan borrowers: ‘When are we going to be done paying these people?’

Consumers also shared their experiences during the public comment period- below are retweets about the stories:Car Title borrower

payday borrower

New Economics For Women shared a consumer story that illustrates how the debt cycle works:

When Lorena (Alias), of Los Angeles, CA, found herself in a tight financial spot, she turned to payday lending….She visited a Speedy Cash location in Los Angeles, CA and borrowed $255, paying $45 in fees and hoping to be able to pay it back in two weeks time….Unfortunately, that was not enough time for her to stabilize her finances, and she had to repeat the loan. She has now repeated the loan 7 times, paying $315 in fees alone….Not only has she had to pay the added $315, she has also acquired overdraft fees. On five occasions, Speedy Cash has taken the money out of her bank account while she was still waiting on disability checks to come in, adding $175 to her expenses, due to payday lending….Hoping to catch up on some of her expenses and be able to get rid of the initial payday debt, she took out a second loan at Speedy Cash for $2,600. However, that loan did not help her at all and has instead dragged her deeper into the cycle of debt. In addition to the repeat loans every two weeks, Lorena now has to pay $38 every two weeks to repay the $2,600 loan. She has fallen behind on her bills and rent and has reached out to family and friends for help. Currently she owes Speedy Cash $2,755 and can only see that amount growing as time goes by.

3. Besides personal stories, research on payday and car title loans has found the products are toxic for the majority of people who use them- pushing them deeper into a cycle of debt.

From a new Pew research report on car title loans:

  • Between 6 and 11 percent of title loan borrowers have a car repossessed annually.
  • To repay a title loan, 47 percent report using a cash infusion, such as a tax refund.
  • 66% of car title borrowers believe the industry should be more regulated.

4. Advocates and practitioners advocate based on the stories and experiences of the people they work with:

Adam Rust, Research Director at Reinvestment Partners, spoke about his organization’s work in housing counseling and providing free tax preparation services.  He agreed that they see people facing difficult financial situations, but explained that paydayloans won’t right the ship- instead they’ll only cause people more hardship.

Paulina Gonzalez, executive director of the California Reinvestment Coalition explained in her testimony that “in many of our communities, we need more income, not just credit.”

5. People across the country are concerned about high cost lenders trying to use loopholes to escape regulations- or using cash to wield influence:

NC AFL CIO

lobbyists

6. While the industry tried to play the “we create jobs card” it turns out that’s not true either:

According to a report from the Insight Center for Community Economic Development, the payday loan industry was responsible for a net loss of over 14,000 jobs in 2011, and a net economic loss of over $750 million.  Bankruptcies that are triggered by payday loans were responsible for another $169 million net economic loss.

7. States like North Carolina and New York that got rid of payday lenders don’t want them back.  

Carlene McNulty, an attorney from the North Carolina Justice Center, commented that North Caorlina had kicked payday lenders out ten years earlier- and the state doesn’t want them back.

NY payday loans8. Communities notice where payday loan companies locate their stores- and where they don’t:

Where do payday lenders locate

 

Want to learn more about payday and car title loans?  We have a few resources:

1.Over 70 editorials have been written about payday lending- Has your local newspaper written one yet? Take a look: Editorials against payday lending  

2. Ever wonder why people are concerned about payday loans and some of the companies that make them?  Is it the high interest rates? The debt traps they create for their customers?  Their shady collection tactics?  The amount of money they spend lobbying state legislators in order to protect their profits instead of their customers? Maybe it’s the extra fees they don’t disclose? All of the above?  Check out the Payday Lender Hall of Shame.

3. It’s not just payday loans that can be dangerous to your health- it’s also high cost car title loans and high cost installment loans too: Careful! Alternatives to Payday Loans Can Also Be Predatory

4. Thinking about an online payday loan?  Here’s 8 strong reasons not to! (hint: if you don’t like having your identity stolen, steer clear!)  8 Reasons Not to Get an Online Payday Loan

 

Six Reasons the Narrative of Complaints Should be Included in the CFPB Complaint Database

Editor’s note: CRC submitted a copy of the letter below in support of the Consumer Financial Protection Bureau adding complaint narratives to the CFPB’s complaint database.

September 22, 2014
The Honorable Richard Cordray
Director, Consumer Financial Protection Bureau
1700 G Street N.W.
Washington, DC 20552

Re: CFPB Complaint Narrative Comments, Docket Number: CFPB-2014-0016

Dear Director Cordray,

The California Reinvestment Coalition represents about 300 community based non-profit and social service agencies across California that serve low and moderate income communities, including communities of color, immigrants, women, and rural communities. While our members work directly with households and small businesses to protect against financial losses such as foreclosure and to build financial capabilities and assets, CRC advocates for reforms among financial services providers and their regulators that will lead to better access to affordable, high quality financial products and practices.

We write today in strong support of the bureau’s proposal in this docket to expand the highly successful Public Consumer Complaint Database to include narrative fields.

Currently, consumers that submit complaints know only that their complaint will be seen by the company about which they are complaining. There is no assurance that anyone at the CFPB will read it, follow up to ensure a meaningful response, or use the consumer’s experience to pursue a regulatory of enforcement action. As a result, companies can freely provide pro forma responses that do not actually address the consumer’s concerns. After all, no one but the complainant is likely to see or respond to the company’s action. An inadequate response to a complaint can leave a consumer completely out to dry, left to pursue the issue outside of the CFPB or any regulatory arena, in favor of other forums where the court of public opinion reigns such as Facebook or Twitter, or, if they have the resources to do so, pursuing private legal action. While that consumer may achieve her goals, all information about that interaction is lost to other consumers and regulators.

We encourage the CFPB to add more detailed information to the database, including complaint narratives, detailed complaint categories and subcategories, complaint resolution details, consumer dispute details, and data regarding membership in classes protected from discrimination by law. We support using technology to both give consumers the right not to provide details, using technology to scrub identifying information, and taking steps to prevent the release of personally-identifiable information or the re-identification of consumers. It is critical that the bureau achieve the disclosure of more individual complaint details while simultaneously making every reasonable effort to protect personal data. Finally, we also support allowing financial institutions to provide a reply narrative and making this available to consumers, researchers and other firms.

By allowing consumers to publish the content of their complaints, and institutions to publish response narratives, the CFPB will dramatically help level the playing field on which consumers engage with financial institutions in several ways:

  1. With access to greater detail about others’ experiences with a financial service provider, consumers can make more informed decisions about which companies to work with.
  2. Consumers that submit complaints will know that they are helping others by publishing their experience, not merely submitting a complaint in hopes of solitary relief or potential enforcement or regulatory action by the CFPB that they may never know about.
  3. The CFPB, consumers, researchers and financial institutions alike will be able to better identify bad practices in need of reform as well as effective responses to complaints and other good practices.
  4. Researchers and regulators will be able to more quickly and accurately identify practices that can lead to system wide crises.
  5. Knowing that complaint information and resolution can be made public, providers are more inclined to provide better responses to complaints submitted rather than pro forma responses that may never be seen by anyone other than the complainant.
  6. More consumers will use the database before, during and after their engagement with a services provider, yielding more data that can help the industry improve products and services.

We also urge the CFPB to expand their proposal to allow consumers to update their complaint narratives. This will ensure that important information is not lost, such as whether the complaint was adequately addressed or if new related issues have come up. Such new information can be identified as dated “updates” to the original complaint.

Sincerely,

Andrea Luquetta, Policy Advocate