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The CFPBWHAT IT DOES AND WHY YOU SHOULD CARE
Center for Responsible Lending
CRL is a nonprofit, non-partisan organization that works to protect homeownership and family wealth by fighting predatory lending practices. Our focus is on consumer lending: primarily mortgages, payday loans, credit cards, bank overdrafts and auto loans.
Agenda
Predatory Lending
Payday, Car-title, and Installment Lending
Educational Debt & For-Profit Colleges
Debt Buying & Debt Collection
What Does The CFPB Do?
Let’s Talk
What Can You Do?
Predatory Lending
Predatory lending imposes unfair loan terms with consequences that are harsher than the borrower anticipates.
Predatory lenders typically aim to keep the borrower in long-term debt. They often take advantage of a borrowers lack of understanding or sophistication.
Predatory lenders tend to target minorities, the poor, the elderly and the less educated.
Payday Lending
The Cycle of Debt:
Costumer gets payday loan.
Can’t afford to repay loan while paying bills and other obligations
Gets another payday loan.
In Colorado, close to 40% of loans are back-to-back transactions which means that the loans are taken out same day the prior loan was repaid.
Installment Lending
Considered “less expensive” than payday loans, but…
Amounts are much larger than payday loans.
Last much longer!
Often secured by a borrower’s car or household goods.
True cost is much higher than appears due to junk credit insurance.
Insurance
Must be paid at time loan is made and is typically of low value.
Insurance is issued by lender’s affiliates .
Borrower’s typically can’t pay lump sum, so lenders increase the loan amount to cover the cost.
Educational Debt
Student loan debt has topped $1 trillion in recent years, making it the largest type of consumer debt outstanding other than mortgages.
The average student loan borrower graduates with nearly $30,000 in debt.
For Profit Schools & UniversitiesStudents in for-profit colleges have less favorable outcomes in comparison to their peers at public and non-profit institutions.
Lower graduation rates. Students at Colorado’s for-profit 4-year colleges are less likely to graduate than their peers at public or private non-profit colleges.
Higher debt burdens. For those who do graduate, for-profit students leave school with substantially higher federal debt than their public and private peers.
Higher default rates. Students who take out student loans to attend Colorado’s for-profit colleges are likelier to default within three years after leaving school than students at other 4-year colleges.
Impact on Students of Color
African Americans and Latinos disproportionately enroll at for-profit colleges
Similarly, they have higher debt levels and lower completion rates than their counterparts attending public or private, non-profit schools
This outcomes places our community at particular risk.
Debt Buying/Debt Collection
The debt buying industry has grown dramatically in recent years, today the Debt Buyers Association has more than 575 members.
In addition to attempting to collect debts through letters and phone calls, debt buyers flood the courts with lawsuits. Those they sue rarely have access to a lawyer.
Frequently they sue the wrong person or for the wrong amount or for a debt already
repaid or not owed.
Who is affected?
Roughly 77 million Americans have debt in collections
Who is more likely to deal with debt collectors? Those in neighborhoods with:
1. Higher unemployment rates, lower household income;
2. Lower health insurance coverage;
3. Lower homeownership rates or home values; and
4. Higher rates of mortgage delinquency or underwater homeowners; and
People in neighborhoods with greater African American and Latino populations.
Getting Sued for Debts Not Owed One of the biggest concerns is that—as the debt is sold from the original creditor and among debt
buyers—critical documentation about the borrower and the amount owed is rarely provided to the debt’s new owner.
The most common complaint about debt buyers is that the debt is not owed.
In some cases, the debt may have been extinguished in bankruptcy or paid back (in full or in part) by the borrower.
In other cases the debt is so old that the borrower is no longer legally obligated to repay
Debt buyers often garnish wages, seize a bank account, or attach a lien to a property.
Default Judgements
Debt buyers count on the fact that most people will not hire a lawyer or defend the suits themselves.
In a sample of 300 cases in Oregon, only one consumer had an attorney representing them
In a Colorado sample, 71% of those sued lost in a default judgment–meaning they mounted no defense. And 38% of those sued had their wages garnished.
In Oregon, 48% of the consumers had liens placed against them for any current or future property.
The CFPB: What do they do?
The Consumer Financial Protection Bureau (CFPB) was created with the passage of the Dodd-Frank Act, to protect consumers from financial abuse. The CFPB:
◦ Accepts consumer complaints;
◦ Enforces the law when companies illegally harm consumers;
◦ Does in-depth, state-of-the-art research into market practices;
◦ Sets standards and rules to rein in industry abuses;
◦ Provides information to consumers and advocates.
Payday Rule: How it Works
Lender must check-borrower has sufficient income versus expenses to repay without reborrowing or defaulting other obligations.
Limits on re-borrowing where borrower struggles to repay.
Payment protections to limit bank account troubles.
Other CFPB work
Data GatheringCFPB has a complain portal that allows
consumers to report any wrong doing by companies
Allows to see if a particular experience is the beginning of a new issue
Responses!The CFPB will respond to the complaint
and it will help find a solution
Enforcement ActionsExample 1
Example 2
Consent JudgementsA blue print for legislation
Groups!
Myth vs. FactsPayday, Car-Title, and Installment Loans
Debt Collection and Debt Buyers
Educational Loans and For-Profit Universities
Read and Re-EnactRead the hand outs
Practice with your group
Switch roles, and try again!
Report back
Defending the CFPB: What can YOU do? Continue the call for a strong payday ruleWrite to your Congress member
Write an op-ed
Wrong Choice ActLet’s make sure Congress doesn’t weaken or undermine the CFPB
This Act would prevent the CFPB from working on payday issues. Forever.
Mobilize!Sign-on letters
Call in days
Join the social media campaign #StopTheDebtTrap