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