Abusive lending: reform needed now

Join the fight!

As many of you know, CitySquare, along the United Way of Metropolitan Dallas, Jewish Community Relations Council and Catholic Charities, has played a major role in curbing the abuses of payday and auto title lenders. Because of our efforts, the Dallas City Council unanimously adopted the most stringent ordinances in the country to regulate this industry. That ordinance has now been adopted by more than 33 different cities throughout Texas, including El Paso, Austin, Garland, Houston, San Antonio and Grand Prairie and there are other municipalities considering the Dallas ordinance. While we and our allies have not been quite as successful at the state level, we did get legislation requiring disclosure and reporting of these businesses which allows more opportunity to tell of the impact they are having on Texas families.
 
Now we have the opportunity to substantially impact the small dollar loan industry on a national level…
 
The Consumer Financial Protection Bureau, the federal agency which provides oversight over abuses in the financial industry, is taking comments from citizens throughout the country regarding their dealings with payday and auto title loans. These comments will be considered as the CFPB recommends to Congress federal legislation that will save the people we care about across the nation, from the debt trap caused by this type of predatory lending.  

What can you do?
If you, or anyone you know, have been victimized by payday or auto title lenders, tell your story! Write it down on this form and send it to United Way of Metropolitan Dallas Attn: Stephanie Mace 1800 N. Lamar St Dallas, TX 75202, or attach as PDF document and send it to DallasStopTheDebtTrap@gmail.com.
 
Check out this Payday Lending Alternative sheet, which is a resource provided by the Anti-Poverty Coalition with counsel for those may be going through hard financial times, along with a list of legitimate lenders who may be able to help.
 
Also, ask your neighbors, co-workers, or fellow community members if they have ever been ensnared in debt because of taking out a payday or auto title loan. If they haven’t, do they have a close relative or friend who may be in debt because of one of these loans.
 
Payday lenders are one of those businesses that help keep poor neighborhoods poor. People who take out these loans are not stupid, they aren’t lazy, they aren’t trying to get something for nothing. People who take out these loans are in desperate situations and get in trouble attempting to pay them back.  For so long, we were told that there was nothing that could be done. Now we have a chance to fight for those in poverty, our friends, and our families!
 
In this fight together!
 
Rev. Gerald Britt Jr.
Vice-President of External Affairs
CitySquare

Battle vs predatory lenders. . .

How a Texas Church Drove Out the Predatory Loan Industry     

For one Garland pastor, living out the gospel means collective political action.

 

Payday lenders have been having a tough time in Garland, Texas.

 

Their storefronts have closed, their gaudy signs spray-painted over in black. In recent months, about a third have left the city of 230,000, situated 18 miles northeast of Dallas.

 

Nobody could be more delighted at their demise than Keith Stewart, senior pastor of Springcreek, Garland’s largest church. Springcreek will not tolerate what Stewart calls the “predatory loan business.” Stewart estimates something like a third of his congregation of 1,700 have been put through the wringer after they (or their family members) secured loans with interest rates easily within the range of 200 to 500 percent.

 

Read more here.

Selling the poor, doing injustice

It’s been almost a year since the Consumer Financial Protection Bureau (CFPB) released their preliminary proposal to regulate payday and other small-dollar lending, and still consumers have no federal protections against predatory small dollar lending. So why hasn’t the CFPB taken action yet? One of the biggest factors has been the continuous and intense pushback from the payday lending industry — and Congress. While attacks on the Bureau by the industry and members of Congress are nothing new, what is new is that these attacks have recently started to come from both sides of the aisle. Even more surprising, members like Debbie Wasserman Schultz, Chair of the Democratic National Committee, are now working to block the CFPB from protecting consumers against predatory payday lending. The efforts by the chairwoman and a majority of the Florida congressional delegation have coalesced around H.R. 4018, the "Consumer Protection and Choice Act," which would not only delay the CFPB payday rules by two years, it would also endorse Florida’s debt trap payday model — which strips $280 million from lower-income Floridians — as a nationally recognized and federally exempted model for other states to implement. Consumers have waited long enough for the CFPB to act, and they’ve lost billions of their hard-earned cash in the process. Congress should not make them wait any longer and should let the CFPB finish the job it started. Tell Congress to reject this damaging bill: Got 1 Minute? Send a Tweet in support of the CFPB’s efforts (and tag your Representative so he or she gets the message!): Payday lending strips billions from financially vulnerable consumers each yr. Congress should let the @CFBP do its job to #StopTheDebtTrap. [Click here to tweet] We need strong a @CFPB rule to protect against predatory payday lenders taking advantage of consumers. #ConsumersCantWait #StopTheDebtTrap [Click here to tweet] 250+ groups oppose HR4018, which would limit the @CFPB's ability to protect consumers from #payday lending: www.bit.ly/1RoyIiY [Click here to Tweet] Got 3 Minutes? Call your U.S. Representative and tell them to reject this damaging bill: Call 202.224.3121 and ask to be connected to your Representative's office. If you don't know who your Representative is, find out here. Once you're connected, here's what to say: My name is [your name] from [your organization or coalition], and I’m calling to request that you oppose H.R. 4018, as well as any effort to weaken the CFPB’s ability to protect consumers against predatory payday lending practices. This bill would codify a number of payday industry-backed practices and recognize Florida’s industry-backed payday lending model — which strips $280 million from lower-income Floridians — as one that other states should follow. H.R. 4018 would harm consumers across the country and would undermine the CFPB’s ability rein in an industry that thrives on stripping financially vulnerable borrowers of their hard-earned money and trapping them in a cycle of long-term debt. Thank you for everything that you do on behalf of consumers everywhere. Sincerely, Corporation for Enterprise Development The Assets &Opportunity Network team   CFED - Corporation for Enterprise Development   1200 G Street, NW Suite 400   Washington, DC 20005   202.408.9788

 

Payday loan oppression

Can you imagine taking out a $500 loan and it costing more than $1100 to pay back? FACT: Every day in our area, many of our neighbors are doing just that and paying up to 484% in interest and fees on small, short-term "payday" loans. This is completely legal in our state, and as a result, payday and auto-title lenders are making billions of dollars while preying upon people in dire need of financial help to pay their rent, to feed their children, and to fix their car so that they can get to work. FACT: According to Texas Appleseed, in the Fort Worth-Arlington area, 105 cars are repossessed per week as a result of auto-title loans. That's nearly 5,500 cars per year and an equal number of families, single parents, senior citizens, and others who may permanently lose their vehicle for being late on one payment, sometimes by a matter of minutes, even though they've been paying back a 300% interest loan on time for months. FACT: Due to inaction by the state legislature to regulate these predatory lenders, many cities have passed meaningful reforms to protect their citizens.  To date, 26 Texas cities, including Dallas, San Antonio, Houston, Austin, Corpus Christi, Amarillo, El Paso, Flower Mound, and Denton, have passed ordinances limiting loan amounts and the number of times a loan may be rolled over. Right now, Arlington is considering becoming the first Tarrant County city to add their name to this list.  FACT: There are several things that you can do to help be a part of the solution. First, if you or someone you know has been a victim of predatory lending, let us know. Call my office at 817-459-2800 or click here to send me an email. We want to know how these loans are personally impacting Texans and trapping people in a cycle of debt. Second, if you live in a city not on this list contact your local leaders and ask them to support a payday lending ordinance in your community. Third, make your voice heard on this issue. Write a letter to the editor, call your legislator, tell your friends. This is a serious issue, the impact of which goes far beyond those who take out the loans. In fact, the Texas Catholic Conference has estimated that 30% of charitable assistance goes to help those in trouble with payday or auto-title loans and that predatory lending has a negative economic impact of $87,578,234 in the Fort Worth/Arlington area alone. FACT: Federal regulations are being proposed, but they will not fully address the problem. Next month, the Consumer Financial Protection Bureau (CFPB), the federal agency with oversight over predatory lenders, is expected to release new proposed regulations. These rules have become a common talking point among those who are opposed to state or local regulation -- they often point to impending action by the federal government as a reason not to pass state or local laws.  Prominent organizations across our state, like the Texas Catholic Conference, the Baptist General Convention's Christian Life Commission, and Texas Appleseed, agree that these rules will not replace local ordinances, but serve to complement these existing laws. It's also critical to point out that the timeline for implementation of federal rules is unclear. My office has been in contact with the CFPB and has been told that it will like take about two years for rules to go into effect; this of course assumes that implementation is not halted by industry lawsuits or a new administration.  Predatory lending is an issue that impacts us all. Even if you have never taken out a loan, somewhere down the line, through the need for more charitable contributions or as a result of the strain on local economies, you're going to pay a price. It's time we help our neighbors and time we act on their behalf. Please, tell us your story, contact your elected officials, or write a letter to the editor. Whatever you do, don't sit on the sidelines and let these predatory lenders trap more of our neighbors in a never-ending cycle of debt. Chris P.S. If you'd like to join our Texas 101 Payday Lending Task Force, click here.

 

Sharks in the water!

Yesterday's editions of The Dallas Morning News published this opinion essay from the paper's editorial staff. It is gratifying to see the work of CitySquare's public policy team and those of our growing number of partners have good results in affecting public values and opinion. Much work remains to be done on the issue of predatory lending, but we're making progress! Thanks, Gerald and team for your hard work.

I've posted the editorial statement below.

Editorial: It’s time for tighter oversight of payday lenders

08 July 2012 10:38 PM

The free-enterprise advocate in us says that payday lenders should operate wherever the market takes them. It’s a business, after all. If people don’t want the product they sell, the market will show them the exit door.

The problem is that quick-cash lenders don’t operate under normal market conditions. Their market, in fact, operates exactly the opposite — enticing desperate people away from what should be their very first option, economizing in every way. When you are short on money, you buy cheaper food, find a lower-rent apartment.

Banks make their services scarce for people in trouble. There’s no cheap, off-brand place to shop. For many consumers, the only choice is to seek out a title lender, who will accept a car or house title as collateral on a short-term, high-interest loan. Like a shark hunting wounded prey, the companies profit by exploiting the customer at his weakest moment.

Texas, which has some of the loosest regulations in the country for payday and title lenders, is witnessing an explosive expansion of these businesses. Oversight is nowhere near what it should be as some lenders charge usurious amounts. Effective rates of 300 percent or more are common, and when the customer can’t pay, his car or house becomes the lender’s property.

In a recent study by Texas Appleseed and the Anti-Poverty Coalition of Greater Dallas, 37 of the 241 short-term lenders in the city were surveyed on their effective rates and the legally required loan information they make available to clients. As Gerald Britt Jr., vice president of public policy at CitySquare, noted on our Viewpoints page last week, 41 percent of outlets surveyed did not abide by legal requirements and offered misleading information about the risks of quick-cash loans.

They get away with it because lawmakers who seek tighter oversight run into an extremely well-funded lobby. Quick-cash lenders donate heavily to politicians and intimidate city governments with the threat of expensive litigation.

Fort Worth-based title lender Cash America International is the No. 1 contributor to Dallas GOP Rep. Pete Sessions. Rep. Jeb Hensarling, R-Dallas, ranks No. 10 in the House for contributions from the payday loan lobby, according to OpenSecrets.org.

The industry donates generously to Democratic and Republican legislators alike at the state level. Dallas Mayor Mike Rawlings previously sat on the board of directors of Ace Cash Express and has defended such services as necessary, particularly in southern Dallas, to serve the “under-banked.”

What about protecting the over-exploited? As this newspaper noted in a Points special section last October, there is a lopsided presence of quick-cash loan shops in the poorest neighborhoods of southern Dallas and an unusually strong concentration of these loan shops in Dallas’ biggest crime hot spots — both north and south. We do not need more of them.

If legislators won't to stand up to this powerful lobby, reject their donations and impose tougher regulations, the least Dallas and other local governments can do is ensure that existing laws are enforced vigorously.

Stop treating the financially vulnerable as shark bait.

Follow the money

A sampling of campaign donations by members of the quick-cash loan industry from 2008 to present:

Recipient / Donor / Amount

Rep. Pete Sessions, R / Cash America Int’l / $37,500

Rep. Jeb Hensarling, R / Cash America Int’l / $24,500

State Rep. Helen Giddings, D / Cash America Int’l / $5,750

State Sen. Royce West, D / Cash America Int’l / $5,000

State Rep. Raphael Anchía, D / Cash America Int’l / $3,500

State Rep. Marc Veasey, D / Cash America Int’l / $2,500

Texans for Joe Straus / Ace Cash Express / $34,000

Texans for Rick Perry / Ace Cash Express / $22,000


Mexican-American Legislative Caucus / Consumer Service Alliance of Texas* / $20,000


Texans for Greg Abbott / Ace Cash Express / $12,500

SOURCES: Federal Election Commission, Texas Ethics Commission

Update from Texas House on Payday Lending legislation

Rev. Gerald Britt, CitySquare's VP of Public Policy and Community Program Development, has been working hard for changes in the payday lending laws in Texas and in Dallas. 

One outcome of his vision and hard work was a visit to CitySquare last Friday by Elizabeth Warren, Assistant to the President and Special Advisor to the Secretary of the Treasury. 

Another result is documented in the press release below that was issued by Texas state Rep. Rafael Anchia and Rep. Marc Veasey on Friday.  The progress is not all that we hoped, but a step in the right direction.  And, the effort is not complete, as the legislation must come to the full House for a vote and work must be done on the Senate side to get a new law. It is important that we express our concerns to our representatives and to our Senators here in Texas about this important issue. 

For Immediate Release:
April 8, 2011

Payday Lending Bills Pass Out of Committee

Bills do not address all concerns with payday lenders, but represent improvement from current law.

AUSTIN -- On Thursday, April 7th, the House Committee on Pensions, Investments, and Financial Services unanimously approved House Bills 2592, 2593, and 2594, by Rep. Vicki Truitt (R-Southlake). These bills create a system of regulations for payday lenders, who currently are subject to very little state oversight.

At the outset of the legislative session, State Rep. Rafael Anchia (D-Dallas) and State Rep. Marc Veasey (D-Fort Worth), who serve on the committee, had hoped for stronger regulation. Both representatives authored or co-authored bills that would have provided for more restrictions on payday lenders. Those bills would have restricted the lenders' ability to roll over past due balances into new loans, charge exorbitant interest rates, and saddle consumers with unexpected debt.

“This bill, although not perfect, brings significant new regulation to an industry that, until now, has been free to operate in Texas with very little oversight,” Rep. Anchia said. He added, "Significantly, the Office of the Consumer Credit Commissioner now has the power to move against the bad actors in the industry on behalf of consumers who look to the state for much-needed protection from predatory lenders."

Despite their preference for stronger legislation, Rep. Anchia and Rep.Veasey voted in favor of the payday lending bills. They feel that the legislation provides as much protection and regulation as possible while ensuring that the bills can obtain the support of the majority of the Legislature. Both representatives believe that the need for regulation of payday lending is too pressing to delay by waiting for more perfect legislation.

“Although I wish that we could pass a bill that would do more to protect consumers, I support this legislation because I believe it is the most we can accomplish this session, and it represents a significant improvement over current law,” Rep. Veasey said.

State Representative Rafael Anchia is currently serving his fourth term in the Texas House. He is the vice-chair of the Pensions, Investments, and Financial Services Committee, and also serves on the Land and Resource Management Committee. Residents of District 103 are encouraged to contact Rep. Anchia at (512) 463-0746.

State Representative Marc Veasey is serving his fourth term in the Texas House. He is a member of the Elections; Pensions, Investments and Financial Services; and Redistricting Committees. Residents of District 95 are encouraged to contact Rep. Veasey at (512) 463-0716.

Payday loans. . .local action now!

Even though the state battle to provide more robust regulation of the payday lending industry is about over, a very important local effort is still very much in play.  Read what follows and then take personal action to help in our efforts to protect our low-income neighbors.

STOP PREDATORY LENDING IN DALLAS

Predatory lending is a big problem across Dallas. In recent years, the number of auto title and payday lending locations has exploded and now over 200 storefronts exist within the city.

Payday and auto title lenders have found a loophole to escape state licensing and are “legally” able to charge outrageous rates, trapping many people in cycles of debt while draining community resources. The Texas Legislature must ultimately act to regulate these lenders so that their practices are fair and reasonable; however, since there is a heavy concentration of these locations in Dallas neighborhoods – particularly in areas already struggling economically -- the Anti-Poverty Coalition of Greater Dallas is calling on the City of Dallas to take action and reduce the negative impact of these lenders through a strong zoning ordinance.

These loans create a treadmill of debt. Few borrowers can repay the loan in full, plus interest, and pay for other monthly expenses. Thus, borrowers must to re-borrow, or “rollover”, the loan in order to fill the gap in their budget created by their loan. None of the rollover payments apply towards the loan principal, so the cost to borrow the money frequently exceeds the original loan principal. Over half of payday borrowers rollover at least once before they pay the loan off – and nearly one in four borrowers rollover loans multiple times.

The average payday borrower pays $840 for a $300 loan. 

Because payday loans are secured by a borrower’s post dated check, payday lenders can hold borrowers’ bank accounts hostage.

If the borrower cannot pay in full or the exorbitant fee to rollover the loan, they will face heavy charges from both the payday lender and from their bank in overdraft charges.

Fees for a one-month $4,000 auto title loan exceed $1,000. This $1,000 fee must be paid every month until the loan is paid in full, or a missed payment can result in repossession of the car.

Last year, nearly 200,000 vehicle liens were filed in Texas by unlicensed auto title lenders.

TAKE ACTION

Contact your State Senator and Representative to tell them that you support Texas regulating payday and auto title lenders.

Sign the petition asking the City of Dallas to enact an ordinance to lessen the concentration of payday and auto title stores and reduce their harmful impact on our neighborhoods.

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THE ANTI-POVERTY COALITION OF GREATER DALLAS

The Anti-Poverty Coalition of Greater Dallas is a new coalition that seeks to move 250,000 people out of poverty permanently by 2020 by coordinating efforts to keep people from falling into poverty and increasing pathways out of poverty. We are a broad-based coalition that unites the business community, faith-based organizations, social service agencies, and foundations. Join our fight today!

The high cost of pay day loans. . .

Not long ago I received the following report from the Center for Public Policy Priorities in Austin, Texas. If you don't know CPPP, you need to, especially if you care about the challenges facing marginalized, low-income individuals and communities. Check out their website at: http://www.cppp.org/research.php?aid=754.

This particular report deals with predatory lenders and the impact of so-called "payday loans" on the poor in Texas. This is a case of our state needing to regulate an industry that is oppressing the already oppressed. People of faith should speak up clearly and often.
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PAYDAY LENDING—HURTING TEXAS FAMILIES

It’s the American Dream that if you work hard you get ahead.

But with the high cost of living these days, that isn’t always the case. Sometimes families run short of cash and turn to payday loans—short-term loans that give Texans a cash advance on their paychecks, Social Security payments, or veteran’s benefits. Millions of families use these loans when they are short of cash, but the high cost outweighs the convenience. Interest rates start at 400 percent APR and can surpass 1,000 percent, and it is typical for a worker to pay $180 in interest on a 10-day, $700 loan. More often than not, the individual is unable to repay the full amount within the short repayment period, and the debt balloons. In fact, most payday lending volume comes from individuals forced by the cost of the original loan to take out another and another. We’ve seen the devastating impact of subprime lending on the economy.

But what do payday loans cost families and communities in Texas?

New Study Calculates Financial Impact of Payday Lenders on Texas

A recent study by the national Brookings Institution calculates the financial impact of payday lending on Austin, Dallas, El Paso, Houston, Fort Worth, and San Antonio. In these Texas cities alone, unregulated payday outfits lent $1.14 billion in 2006. Statewide, these outfits lent at least $2 billion. To obtain these cash advances, working Texans paid at least $400 million in interest and fees, not to mention bank overdraft fees and credit costs ensuing from brutal collection practices. In other words, each year, payday loans cost Texas families nearly double what the state sets aside for financial aid so that aspiring students can attend higher education.

To view fact sheets for the six Texas cities, visit http://www.cppp.org/research.php?aid=754.

Responsible Lenders Offer Better Options

Responsible lenders offer better options than payday loans. Several credit unions and banks are now offering short-term loans at a fraction of the cost of a payday loan. The FDIC is also partnering with three Texas banks in a two-year pilot project to identify best practices in affordable small-dollar loan programs that can be replicated by other financial institutions. These banks include Main Street Bank (Kingswood), Amarillo National Bank (Amarillo), and Liberty National Bank (Paris).

Responsible lending needs to be encouraged.

Texas Needs to Regulate Payday Lenders

To see our analysis of the problems with payday lending and our policy recommendations for standards and accountability, read As Payday Lending Spreads across Texas, Can It be Reformed or Regulated? (Dec. 2006) at http://www.cppp.org/research.php?aid=594&cid=2&scid=2 and Unregistered and Unregulated: Payday Lenders Put Consumers
at Risk and Flout Texas Usury Laws (Aug. 2005) at http://www.cppp.org/research.php?aid=443&cid=2&scid=2.
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Here's the Dallas fact sheet on the problem:

Number of non-bank check cashers 107
Number of payday lenders 98
Total value of checks cashed $246,742,765
Total value of payday loans $171,223,901
Total fees on checks cashed $6,168,569
Total fees on payday loans $27,823,884
Number of pawnshops 88
Number of banks and credit unions 366
Total value of pawn loans $21,157,915
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What should be done? Any ideas?