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About The skanner. (Portland, Or.) 1975-2014 | View Entire Issue (July 15, 2015)
Business News Congress Urges Stronger Action Against Payday Loan Vendors T Their triple-digit interest rates and access to borrowers’ bank accounts or car-titles place these borrowers in financial jeopardy Members of Congress are urging the FTC to take similar action against sim- ilar violators. Every day online and storefront pay- day lenders trap borrowers in long-term cycles of debt. Their triple-digit interest rates and access to borrowers’ bank ac- counts or car-titles place these borrowers in financial jeopardy. FTC’s actions and others undertaken by federal and state regulators reveal rampant abuses in the short-term, small-dollar lending market. More than 100 Members of Congress representing 35 states, the District of Co- lumbia and the Virgin Islands, recently urged the Consumer Financial Protection Bureau (CFPB) to enact a strong rule to curb abusive practices by payday lenders and other high-cost predatory loans like car-title and certain installment loans. In separate letters, 33 U.S. Senators and 68 House Members urged the same action: strong regulation and enforce- ment of abusive and predatory consumer lending. Their calls for CFPB rulemaking comes as the Bureau finalizes its proposed rule, first announced in late March. At that time, a letter signed by 500 consumer ad- vocates from all 50 states waged an un- precedented push for reining in abusive small-dollar and high-cost loans engaged the White House and Capitol Hill. Now, after listening to an onslaught of diverse and strong voices, federal law- makers are adding their voices and influ- ence to the continuing fight for fairness. “Predatory lenders should not be able to continue unfair, deceptive, and abu- sive acts or practices that are designed to trap borrowers in a cycle of debt,” wrote 33 Senators. “This is a business model rooted in preying on individuals and families that have no ability to repay, and the CFPB has a critical opportunity to protect consumers by issuing strong rules.” Members of Congress with constituen- cies as varied as their broad geographic expanses similarly called for CFPB to adopt strong regulation. “While there is a need for affordable credit, unfair, deceptive and abusive payday and car title lending practic- Washington Informer Staff Special to the NNPA M By Charlene Crowell NNPA Columnist he Federal Trade Commission (FTC) will provide $32 million in relief to consumers who were caught in a maze of charges and fees de- signed to trap them in payday loans they never authorized. The enforcement ac- tion announced July 7, affects two lend- ers based in Kansas City, Mo. who oper- ated as many as 16 different businesses involved in online lending. The FTC also imposed an additional $22 million fine against the lenders and banned them from all consumer lending. Minority Banks Shut Out of Federal Tax-Credit Program Charlene Crowell NNPA Columnist es often pull consumers into a cycle of debt,” wrote the members. “We support the Bureau’s efforts to close the door to unaffordable loans by addressing failure to underwrite for affordable payments, repeatedly rolling over or refinancing loans, accessing the consumer’s account for repayment, and performing costly withdrawals.” As consumer advocates stress the im- portance of the ability to repay a loan as a cornerstone of both responsible lend- ing and effective regulation, a new poll jointly commissioned by Americans for Financial Reform and the Center for Re- sponsible Lending, asked 2016 likely voters their opinions on consumer lend- ing and regulation, Wall Street influences and actions taken by the Consumer Fi- nancial Protection Bureau (CFPB). Respondents showed strong and bipar- tisan support for regulation of financial services and products. By more than a 10-to-one margin, they favored a rule requiring small-dollar lenders to verify a This is a business model rooted in preying on individuals and families that have no ability to repay customer’s ability to repay before a loan can be issued. Other poll results showed: • Nearly three-quarters – 73 percent – said they favor the central provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act; • Respondents continue to view the fi- nancial industry as under-regulated; and • They also believed that regulations and enforcement will ensure financial insti- tutions act fairly and responsibly. “We are thankful for lawmakers and regulators standing up against these predatory loan practices which drain bil- lions of dollars a year from low-income families,” said Diane Standaert, director of state policy with the Center for Re- sponsible Lending. “As CFPB moves towards issuing its proposed rules, we urge it to use its full authority to stop the dangerous debt trap of these loans, and eliminating loopholes.” According to policy experts, CFPB could act on the pending regulation sometime this fall. inority-owned banks are crying foul about the fed- eral government snubbing them for tax credits they say could generate economic development in the nation’s most needy communities. The Community Devel- opment Financial Institu- tions (CDFI) Fund, an arm of the Treasury Department, issued in June $3.5 billion in New Markets Tax Cred- it (NMTC) allocation to 76 entities across the country to spur economic develop- ment. However, none were awarded to the nation’s minority banks, despite those institutions claiming the longest track records of deploying capital in the nation’s most underserved areas. “The NMTC program has great potential to be part of a comprehensive economic solution in America’s in- ner cities, most of which still have not recovered from the Great Recession,” said Preston Pinkett, CEO of City National Bank and chairman of the bankers as- sociation. “But the groups best equipped to make those investments, minority banks — many of which have been in service for over 100 years — have largely been shut out of the NMTC program. We need our CDFI Fund to do more; we need a real change that will allow us to receive allocations so we can use these resources to improve our communities.” The federal tax-credit pro- gram provides a tax credit to investors who invest in projects or small business- es in those communities by funneling their investments through the recipients of tax credit allocation. According to the CDFI Fund’s Award Book, only six awards — less than 8 percent — went to minori- ty-controlled entities of any kind, and those groups re- ceived only $165 million, under 5 percent of the total dollar amount of allocation. “The absence of a single minority bank raises much concern,” said Michael Grant, president of the Na- tional Bankers Association. A 2009 study by the Gov- ernment Accountability Office indicated that only about 9 percent of minori- ty entities were successful Industrial Bank of Washing- ton, D.C. and former chair- man of the bankers associ- ation. “Some of our banks have been deploying capital in the poorest neighbor- Only six awards — less than 8 percent — went to minority- controlled entities of any kind when applying for NMTCs, while non-minority entities had three times the success rate, winning 27 percent of the time. According to GAO, although the pro- gram is highly competitive, minority entities have less than a one in three chance of any other type of entity to receive an award.1 Minority banks have had even lower success rates than minority entities overall. “By our estimates, less than 2 percent of the $450 billion in NMTCs issued over the past 12 years has gone to minority banks,” said Doyle Mitchell, CEO of hoods in America for over 100 years, and we think the CDFI Fund should review the program to ensure that applications by minority and other small CDFI banks are evaluated on criteria that reflects their position as reg- ulated institutions operating in distressed areas, which is significantly different from non-regulated or larger in- stitution applicants.” Alden McDonald, CEO of Liberty Bank in New Orleans, said the imbalance would be even more pro- nounced had it not been for funds his bank received af- ter Hurricane Katrina. Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Char- lene.crowell@responsiblelending.org. July 15, 2015 The Portland and Seattle Skanner Page 9
