Wednesday, December 21, 2016

From The Reader: The High Cost of Being Poor

The High Cost of Being Poor: Aggressive creditors exploit Nebraska law

Monday, December 19, 2016

From Dallas Business Journal: Banking from the Shadows: Does the Texas banking industry discourage undocumented customers? The answer might surprise you

Banking from the Shadows: Does the Texas banking industry discourage undocumented customers? The answer might surprise you

For Fernando, buying something on eBay was the first time he felt like an American.
His sister told him to open a bank account when he was a senior in high school because he needed an account to shop online.
It was a simple transaction – routine to the teenagers he grew up with in border towns in South Texas. But for the undocumented immigrant, it was one of many reminders that his status was different.
He remembers the Bank of America card with his name embossed on it more than he remembers what he bought.

“It legitimizes you,” said Fernando, now an immigration attorney in Fort Worth. He agreed to speak with the Dallas Business Journal under the condition that his actual name not be revealed.

Click the slideshow to see the nation's top unbanked cities and the nation's top underbanked cities.

Many undocumented immigrants believe they can’t open banking accounts, fearing the bank will flag their status to law enforcement or that they’ll simply be turned away.

Instead, many rely on cash, which leaves them vulnerable to being robbed. They also are preyed upon by payday lenders and other credit services with high fees.

What most people don’t know is that banks, especially those in Texas, quietly recruit undocumented Hispanic customers. The banks assure that all a customer needs to open an account is their passport issued by another country or a U.S. tax identification number.

Bankers interviewed say they never ask about citizenship status. The industry as a whole is agnostic on the immigration issue that played a central role in the election of Donald Trump as president.
Trump will sweep into the White House next month on the promise of building a border wall with Mexico and accelerating deportations of some 11 million undocumented immigrants in the U.S. – with an estimated 1.5 million in Texas alone.

Those communities say the powerful banking lobby should stand up for them.

“They do have an obligation to have a stance,” Fernando said. “They are stakeholders. We are their clients.”

‘We don’t find it risky’
As a boy, Leo Lopez translated for his mother when she tried to open an account in Dallas. Now he is vice president and bilingual branch manager in the Bank of Texas Dallas office near Farmers Branch.
The Hispanic Chamber of Commerce member helps locals who are “unbanked” open accounts.
He doesn’t know how many accounts Bank of Texas has opened for undocumented immigrants, as the bank doesn’t ask. But he said about 75 percent of their Hispanic customers opened their accounts using a passport.

“There isn’t any more risk for them [as opposed to] anyone else,” Lopez said of customers who aren’t in the country legally. “There is an opportunity to give more access to those who are unbanked.”
Lopez confirmed that banks rarely know a customer’s immigration status. They aren’t required to take that information and it’s not often volunteered.

But Fernando did tell Bank of America. He said a younger generation of undocumented immigrants, many of them brought here as children, are eager to open bank accounts and build credit. Some banks, he said, even offer mortgages to undocumented immigrants to buy a home here.

“We went and said, ‘We’re undocumented. What can we do?’ ” he said. “They were very friendly.”
Bank of America declined to comment for this story and instead directed questions to the American Bankers Association, the industry’s main lobbying arm in Washington, D.C.

“Banks don’t track whether or not someone is legally in the U.S.,” said ABA’s Senior Counsel Rob Rowe.

He said the group hasn’t lobbied on the immigration issue and doesn’t plan to do so.

Pushing lawmakers for a more progressive stance on immigration may jeopardize their influence over which banking rules will be relaxed.

Republicans have pledged to dismantle the 2010 Dodd-Frank law, which was put in place after the banking crisis to make the system safer and prevent future bailouts by taxpayers.

Additionally, policymakers haven’t required banks to determine whether their account holders were in the country legally. “It’s something that’s outside the banking industry,” Rowe said.

At Bank of Texas’ Dallas office, the firm’s senior vice president and consumer regional manager for DFW East Scott Bishop, spokeswoman Jacquie Donovan and Lopez paused when asked if the bank or the industry as a whole should take a stance on immigration.

They declined to answer, but said they welcome undocumented immigrants as clients. In the event that account holders are deported, their funds are not seized under current law, and their debit cards and other services will still work, they said.

“Because we’re in that industry of risk, we don’t find it risky to bank folks that are undocumented,” Bishop said.

‘He won’
Fernando didn’t watch the election results come in. He went to bed early when his brother texted, “he just won Florida,” referring to Trump’s collection of electoral college votes in the Sunshine State.
At 2:11 a.m., Fernando got another text from his brother: “he won,” then later, “wtf just happened?”
Fernando’s status in the Deferred Action for Children Arrivals program is now in jeopardy. He was brought to the U.S. when he was 7, and his parents overstayed on their visa. They had owned several furniture stores in Mexico, but when the economy turned south, they moved north.

His mother cleaned houses and his father mowed lawns. With the stroke of a pen, Trump could eliminate the DACA program, which has provided a haven for roughly 700,000 immigrants, including Fernando and his brother.

The phones in Fernando’s office have been ringing constantly since election night. Many are clients Fernando and his colleagues had lost touch with. They’re now hurriedly calling back, hopeful to move their immigration cases forward.

Some are new clients wanting to squeak into the program while it’s still active, but Fernando said they’re not sending in new applications. They don’t want to put the addresses of undocumented immigrants into the system in the event there are raids.

It’s unknown what Trump will do. He has indicated there could be mass deportations, but has also signaled that those with a criminal history would be deported first and the rest taken on a case-by-case basis.

Many economic experts say allowing immigrants to stay will benefit Texas and local banks.

Helping the economy
Foreign workers immigrating to the state – legally and illegally – have made up roughly 40 percent of the state’s labor force growth between 1990 and 2010, Federal Reserve Bank of Dallas President Robert Kaplan said in a Nov. 7 speech.

Kaplan defended the influx as “substantially beneficial” to the economy and pointed to research that showed immigrant workers are more likely to file patents and are more entrepreneurial with higher rates of self-employment.

As the Mexican economy has rebounded, more Mexicans are leaving the U.S. than migrating here, according the Pew Research Center.

In total, about 9 percent of the Texas labor force is undocumented.

Dallas-based nonprofit Transformance helps undocumented immigrants open banking accounts, making it easier to enter the immigration system. But Transformance CEO Ken Goodgames hesitated to say whether Trump’s immigration policies would hurt the economy or the banking industry.
“There is always a possibility that with a new administration the existing policies would change,” he said.

Banks are eager to attract more customers as profit margins have shrunk since the financial crisis.
About 70 percent of new accounts are opened in banking buildings, though few customers ever go inside a physical location again. This means that banks must still maintain the costly real estate of their branches in order to boost new accounts.

Wells Fargo tried to stay profitable by opening fraudulent accounts for existing customers, resulting in a recent $185 million fine, a Justice Department investigation and the resignation of CEO John Stumpf.

But there are still new account holders who can be recruited.

About 14 percent of residents in the City of Dallas are unbanked, according to a nonprofit project of the Corporation for Enterprise Development. Another 21.7 percent are “underbanked,” meaning those who have a banking account but have resorted to using other financial products such as payday loans.
Despite the uncertainty surrounding immigration policy, Fernando has chosen to remain stoic with his clients.

He finds comfort in going about his day-to-day duties as any other American would, such as paying his bills with his bank account and keeping up with his credit score.

After the election, Fernando was on a conference call with other immigration attorneys. He was told that if his work status was revoked, it could cost him the law license he earned earlier this year. He’d wanted to be a lawyer since before his family moved to the U.S.

After the phone call, he shut the door to his office and cried.

“I felt like I had accomplished the American dream,” Fernando said. “Until now.”

What's the minimum documentation you need to open a bank account in Texas?
Undocumented immigrants can open a bank account if they provide:
  • Proof of their name
  • Billing address
  • Names can be presented with a passport, a consular ID, or even a Texas ID if the account holder has qualified for one
  • An identification number (A social security number isn’t required. Banks will accept an ITIN, or an individual taxpayer identification number, which is issued by the IRS.)
Jon Prior covers finance for the Dallas Business Journal.

Thursday, December 15, 2016

From Fortune: Trump’s Dismantling of Dodd-Frank Would Be 2008 All Over Again

Trump’s Dismantling of Dodd-Frank Would Be 2008 All Over Again

The financial sector will get a brief sugar high, then crash.

During the presidential campaign, President-elect Donald Trump asserted that he would “dismantle” the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. His nominee for treasury secretary, Steven Mnuchin, began to speak out against financial reform from the moment his nomination was announced, suggesting that he would “kill” aspects of Dodd-Frank, roll back the law’s Volcker Rule against proprietary trading, and focus solely on regulating FDIC-insured banks.
Ending Dodd-Frank would be deeply misguided and likely to recreate the very conditions that led to the 2008 financial crisis, shuttered American businesses, and cost millions of Americans their jobs. The financial sector will get a nice sugar high for a few years, and then crash the economy.

But despite these looming consequences, lobbyists have sought to weaken the law for the last six years. Many Republicans in Congress have been attacking Dodd-Frank since its enactment, and have put forward a series of bills to roll it back. Just this month, the House passed legislation to remove most banks over $50 billion in size from the requirement for safety stress testing. Another House bill would block regulators from requiring global capital cushions for big insurers like AIG.

Earlier legislation rammed through the House Financial Services Committee by Representative Jeb Hensarling blocked the Financial Stability Oversight Council from designating nonbank firms like Lehman Brothers and AIG for the Federal Reserve’s regulatory supervision. The bill would also eliminate the FDIC’s ability to wind down firms like Lehman or AIG without either a bailout or a crushing blow to the financial system, block the Fed from oversight of critical nodes in the system, weaken the Securities and Exchange Commission, and undermine the Consumer Financial Protection Bureau, among other risky actions.

That approach seems to be exactly what Trump has in mind by dismantling Dodd-Frank. In doing so, the president-elect will be making three grave errors: eliminating oversight on all but the biggest, FDIC-insured banks, ending oversight of shadow banking, and gutting the consumer bureau.
While cutting back on oversight has been pitched by lobbyists as helping community banks, it has nothing to do with that. The Fed already has a graduated, tailored system of regulation, with increasing stringency, depending on the risk that the firm poses to financial stability, based on its nature, scope, size, scale, concentration, interconnectedness, and other factors. None of these apply to the 95% of banks with under $10 billion in assets, the category commonly described as community banks.

The banks that get relief under these Republican-supported bills include foreign banks, credit card banks, trust banks, and many banks of the size and type that made horrific subprime mortgage loans and failed during the financial crisis. While these aren’t the handful of the largest financial firms, they still pose substantial risks to the system.

A second big mistake would be to ignore shadow banking. The designation of systemically important, nonbank financial institutions is a cornerstone of the Dodd-Frank Act. The reason for the designation process is that such institutions were not subject to meaningful, consolidated supervision by the Fed at all. Shadow banks such as Lehman Brothers and the insurance conglomerate AIG could operate with more leverage and riskier practices and pose a risk to the financial system. Dodd-Frank established a process for bringing such firms under regulatory oversight.

Critics of designation contend that it fosters “too big to fail” by suggesting that firms would be bailed out in a crisis, but the opposite is true. Regulating systemically important firms reduces the risk that such a firm could destabilize the financial system and harm the real economy. It provides for robust supervision, capital requirements, and a mechanism to wind down such a firm in the event of crisis without exposing taxpayers or the real economy to the risks of the firm’s failure.

Lastly, we can’t let a Trump administration gut the Consumer Financial Protection Bureau. The bureau has been the target of brutal attacks by lobbyists and ideologues since its founding, but the truth is that the bureau has done a remarkably sound job bringing enforcement actions against abuses like those revealed in the Wells Fargo scandal, writing rules on mortgages and payday loans, and cleaning up bad practices in debt collection, credit reporting, and other areas. Attacks on its structure, budget, director, and authorities are a pretext for weakening consumer protections in general.
We can’t afford to develop amnesia about the causes and consequences of the financial crisis, or we’re bound to repeat our past mistakes.

Michael S. Barr is a professor of law and public policy at the University of Michigan, nonresident senior fellow at the Center for American Progress, and former assistant treasury secretary for financial institutions.

Tuesday, December 13, 2016

From JDSupra Business Advisor: CFPB's First Project Catalyst Innovation Report Addresses FinTech Regulation

CFPB's First Project Catalyst Innovation Report Addresses FinTech Regulation

In October, the CFPB issued its first ever Project Catalyst Innovation Report highlighting "innovation insights" by FinTech companies in multiple areas. The CFPB launched the Project Catalyst initiative in November 2012 with the mission of collaborating with financial technology innovators on marketplace developments and creating programs and policies that support "consumer-friendly innovation." The report is noteworthy as it provided insight as to the CFPB's philosophy for regulating FinTech companies following a recent enforcement action.

One of the critical issues being debated by the CFPB is how to regulate FinTech companies. In prepared remarks discussing the report at a recent conference, CFPB Director Richard Cordray noted that "Everyone who provides consumers with financial products and services must adhere to the same standards and will be held to the same expectations."

This position echoes a recent $3.63 million enforcement action by the CFPB against Flurish, Inc., an online lender doing business as LendUp, for "failing to deliver the promised benefits of its products." LendUp promoted itself as an alternative to traditional payday loans through the "LendUp Ladder," a program pitched to consumers as providing the ability to improve credit scores and obtain more favorable rates over time. However, the CFPB found that many of the products offered by LendUp were not available, that inaccurate information was provided regarding the true cost of the loans and, despite promises that consumers could improve credit scores, the company did not furnish any credit reporting on its loans until more than two years after origination. As part of the consent order, LendUp was required to provide $1.83 million in restitution to impacted customers and a civil penalty of $1.8 million. In the enforcement action, Director Cordray stated that, "The CFPB supports innovation in the FinTech space, but start-ups are just like established companies in that they must treat consumers fairly and comply with the law."

Along with discussing regulation, the Project Catalyst report also noted current initiatives and marketplace developments by FinTech companies in the following areas:
  • Credit Reporting Accuracy The Project Catalyst is placing an emphasis on helping consumers understand negative information on credit reports. The report notes that many FinTech companies are developing applications to allow consumers to "streamline the process for consumers to dispute errors on their credit reports directly." Other companies are offering consumers free credit scores and present hypothetical scenarios for consumers to improve credit scores.
  • Mortgage Servicing Platforms FinTech companies are working to develop more modern platforms to "improve loan servicing and provide more flexibility, scalability, and systems integration capacity." The report notes that many servicers are currently using legacy technology platforms which increase the risk of "data inaccuracies" during servicing transfers.
  • Access to Consumer Financial Data The CFPB remains focused on the ability of companies to access the personal information and financial data of consumers in order to reduce the time spent to verify consumer accounts. This has been met by resistance from financial institutions who want to limit the sharing of consumer data with third parties. Director Cordray commented that the CFPB is "gravely concerned" about the resistance from financial institutions in this area.
  • Cash Flow Management Due to challenges posed by changes in income and expenses, the Project Catalyst has been working with FinTech companies who are developing applications and products to minimize distress. These ideas include: (1) developing services to allow employees to access accrued wages before a payday; (2) allow consumers to "smooth" income by setting aside earnings from above-average pay periods; and (3) deducting a portion of a consumer's wages and applying it to recurring payments.
While the first report from the Project Catalyst emphasizes that it wants to engage with FinTech innovators to develop new products and services, the report and recent enforcement action demonstrate that no regulatory leeway will be given for the sake of innovation. The CFPB will hold all companies, regardless of size, to the same regulatory standards. Whether FinTech Companies and the CFPB will be able to meld the goal of evolving technology with strict regulatory standards remains to be seen.

Monday, December 12, 2016

Guest Blog Post from New American Economy: New Report Shows Immigrant Contributions to Fargo-Moorhead Area Advance the Economy

New Report Shows Immigrant Contributions to Fargo-Moorhead Area Advance the Economy

October 20, 2016
Sarah Roy, New American Economy, Sarah@renewoureconomy.org

New Report Shows Immigrant Contributions to Fargo-Moorhead Area Advance the Economy

Fargo, ND – Today New American Economy has released new research showing that the 10,663 foreign-born residents of the Fargo-Moorhead metro area make significant contributions to the region’s economy through millions of dollars in tax contributions and spending power, and high rates of workforce participation in key local industries.

The report, “New Americans in the Fargo-Moorhead Region,” finds:
  • In 2014, foreign-born residents contributed $542.8 million to the metro area’s GDP, including $13.8 million in state and local taxes. This groups also wields $149.4 million in spending power.
  • Foreign-born residents in Fargo tend to have higher levels of educational attainment. In 2014, 27.6% of immigrants in Fargo held at least a bachelor’s degree, compared with 23.6% of the U.S.-born population. About 11.3% of the immigrants held advanced degrees, compared with 5.8% of the U.S.-born population.
  • In fall 2014, 1,597 students enrolled in colleges and universities in the metro area held temporary resident visas. These students supported 343 local jobs and contributed $36.5 million in spending in that academic year.
    • If Fargo retains one half of its international students with a bachelor’s degree or higher after graduation, 373 local jobs will be created within six years, boosting the metro area’s real GDP by $84 million.
  • Because of the role immigrants play in the workforce helping companies keep jobs on U.S. soil, it’s estimated that in 2014, the 10,663 immigrants and refugees living in Fargo helped create or preserve 490 local manufacturing jobs that would have otherwise vanished or moved elsewhere.
  • Foreign-born households also support federal social programs. In 2014, foreign-born households in Fargo contributed $23.5 million to Social Security and $5.9 million to Medicare
With the release of this report, the Fargo Human Relations Commission is announcing the commencement of a process that will engage community leaders in an inclusive discussion of what the City of Fargo can do to ensure that all community members are welcomed and encouraged to succeed.  

Read the full report here.
About New American Economy
New American Economy (NAE) brings together more than 500 Republican, Democratic and Independent mayors and business leaders who support immigration reforms that will help create jobs for Americans today. NAE members include mayors of more than 35 million people nationwide and business leaders of companies that generate more than $1.5 trillion and employ more than 4 million people across all sectors of the economy, from Agriculture to Aerospace, Hospitality to High Tech and Media to Manufacturing. NAE members understand that immigration is essential to maintaining the productive, diverse and flexible workforce that America needs to ensure prosperity over the coming generations. Learn more at www.RenewOurEconomy.org.

Monday, December 5, 2016

Guest Blog From CFED's Assets & Opportunity Network: Assets & Opportunity Network Leaders Make Significant Strides in the Field

Assets & Opportunity Network Leaders Make Significant Strides in the Field

By Dara Duratinsky on 11/22/2016 @ 12:00 PM
During the 2016 Assets Learning Conference, the Assets & Opportunity Network celebrated its 4th birthday. Since its official launch, the Network has expanded its reach and connections considerably, including:
  • Growing from 850 Members to 2,000 Members in every state and DC
  • Having 66 Lead State, Local and Tribal Organizations to 93 Network Leaders in 44 states and DC
  • Reaching 10,953 people with communications to more than 134,000 individuals
  • Reaching over 107,000 people through social media to reaching over 206,000 people
  • Educating 1,308 policymakers in local, state and federal government to educating more than 3,000 local, state and federal policymakers on asset building policy issues
To celebrate the Network’s fourth birthday, we wanted to share with you the 2015 Network Leader Impact Report which discusses the reach, impact and accomplishments of the 93 Network Leaders! Network Leaders Learn, Connect and Act to build an opportunity economy in their communities and nationally by participating in capacity building and learning opportunities; connecting with other stakeholders for greater sharing and collaboration and take action in policy advocacy that will improve programs and policies for low- to moderate-income households. Nearly a quarter of Network Leaders also lead local or state asset building coalitions, convening partners in their communities to advance common economic opportunity agendas. Network Leaders had many accomplishments in 2015. Highlights include:
  • Engaging nearly 6,000 stakeholders nationally through coalitions
  • Successfully implementing, improving or defending 60% of state and local policies that were attempted to introduce, improve or defend
  • Successfully advocating for increased VITA funding and improvements to the EITC and CTC at the federal level
If you want to get more involved, you can join the Network as a General Member to stay informed and find out how to engage in learning and advocacy opportunities. CFED staff hope you can help contribute to even more success in 2017 and beyond!

Read the report here!

Wednesday, November 2, 2016

Payday Predators from the Catholic Bishops of Kansas and the Kansas Catholic Conference

Payday Predators

Oct 31 2016 - 12:19pm | Edward J. Weisenburger
Protecting our most vulnerable from debt is an act of mercy.
In imitation of our Master, we Christians are asked to confront the poverty of our brothers and sisters, to touch it, to make it our own, and to take practical steps to alleviate it.” —Pope Francis

Pope Francis designated 2016 as the Jubilee Year of Mercy, urging the church to move the alleviation of poverty to the heart of our efforts with renewed zeal. In response, the bishops of Kansas, along with the staff of the Kansas Catholic Conference, undertook a careful survey of the more pressing social issues of our state. We concluded that among the structural evils affecting the poor, predatory lending—also known as payday lending—stands out as especially cruel. Like a cancerous tumor, it has grown swiftly, and it is dehumanizing to its victims—all while creating barely a ripple of public interest or concern.

To understand how we got to this point, first recall that from the beginnings of civilization, there have been teachings and laws against usury. Abusing the poor by lending money to those in crisis at astonishingly high interest rates is a practice that has been restricted or condemned by every civilization. Such behavior was rightly recognized as destructive and corrosive for communities and society. Moreover, from biblical times, one of the hallmarks of a jubilee year has been the cancellation of debts that were beyond the ability of the poor to pay. Liberation from the psychological and material “prison” of indebtedness is the perfect metaphor for God’s mercy.

Even given our nation’s secular history, legislation preventing usury was a natural part of our legal system until very recently. It was only in the 1990s that subtle changes in the law quietly and quickly eroded legal protection from usury. The result is a billion-dollar industry now advertised as friendly, safe and legitimate; indeed, it is actually presented as an altruistic financial service. The fact is that nothing could be further from the truth. So what is the truth?

Here are the facts. Payday lenders take advantage of a state of desperation experienced by those in dire financial circumstances. It is this sense of crisis that causes those (often with little financial understanding and few other options) to initiate an unseen cycle of debt from which it quickly becomes virtually impossible to escape. In 1995, there were 37 payday loan entities in Kansas; by 2014, this number had grown to 347. Sadly, Kansas has one of the highest payday loan use rates in the country: 8 percent of the adult population. This means that 175,000 of our family, friends and neighbors are ensnared by payday debt.

Unlike more mainstream and regulated financial products (like loans from banks or savings and loan institutions), most payday loans provide scant consumer protection. The average loan is $300 and must be repaid within two weeks, when the borrower receives his or her next paycheck. The fees charged for the loan are equivalent to an annual percentage rate of over 300 percent. More than 80 percent of loans cannot be repaid within this time period. The result is typically a loan that ends up with doubled or tripled fees. The initial sum constitutes more than a third of the average borrower’s disposable income, leaving even less money to pay for basic human needs such as food, housing, transportation to the place of employment and utilities.

Who is most at risk? No one is more vulnerable to the catastrophic consequences of “ballooning” fees than those who live on fixed incomes or who have been designated by social services agencies as highly at risk and unable to secure additional income because of advanced age, disability or some other critical circumstance. In 2014 there were 1,006,388 payday loans made to Kansans, totaling almost $392 million. Based on national averages, tens of thousands of these loans were made to Kansans who earn less than $20,000 per year. Roughly 30,000 of the poorest borrowers depend upon Temporary Assistance for Needy Families, disability benefits or Social Security as a major or even the primary source of income. What this means is that a substantial number of our Kansas tax dollars are being funneled through the poor and into the pockets of the payday loan industry!

Moreover, 53 Advance America outlets in the state of Kansas alone are owned by Salinas Pliego, a Mexican billionaire. Not only are Kansas tax dollars being funneled through the poor and into the pockets of the payday loan industry, but a significant amount is going to a billionaire in a foreign country. More disturbing is that our poorest neighbors and co-workers, who legitimately depend upon every penny of public assistance to care for their children or sick family members, would have been required to pay an estimated $10 million in interest and fees on those loans made in 2014. Each borrower paid an average of $325. As the yearly limit for TANF is $1,300, nearly one-fourth of this crucial, fixed income would be required just to service a loan.

While our research focused on the state of Kansas, it is worth noting that 14 states and the District of Columbia have outlawed predatory (payday) lending. The New Economy Project of New York estimates that these laws have saved $3.5 billion annually that payday lenders would otherwise siphon in fees. It is also worth noting that the federal government has imposed an annual interest rate cap of 36 percent for military personnel and their families, after concluding that predatory lending was harming them to the point of undermining military readiness.

The same protection should be given to all U.S. citizens, but the predatory loan industry’s lobby is powerful, and legislation is often gutted of any real power to protect the vulnerable. In Kansas, for example, it is illegal for a borrower to take out multiple, simultaneous payday loans, but with no structure in place to track payday loans, this law is entirely ignored. This already catastrophic situation is compounded by the ease with which predatory lenders now offer their services over the internet. And there is little relief from the federal regulatory agencies tasked with supervising the industry. This May, the Consumer Financial Protection Bureau published preliminary new regulations of the industry, but they have numerous deficiencies, particularly concerning the verification of a customer’s ability to repay loans while affording household necessities.

The Catholic dioceses in Kansas are taking steps to alleviate some of the damage caused by this structural evil. Catholic Charities of the Diocese of Salina and the Archdiocese of Kansas City in Kansas have initiated programs that provide financial mentoring for those who have become ensnared in predatory lending. These programs help victims to transfer predatory loans to legitimate banks and savings and loan institutions; the new loans, with drastically lower interest rates, are backed by Catholic Charities. Those previously trapped in predatory loans now have a realistic possibility of becoming debt-free. But we have hit two roadblocks. The first is that we obviously do not have the assets to back an unlimited number of these crippling loans. While making a difference, we can never alleviate so massive a structural evil on our own. The second roadblock, which was not anticipated, is the challenge of actually paying off the balance of a payday loan. The director of Catholic Charities in Kansas City in Kansas has spent hours struggling to pay off loans in person, only to encounter resistance from the payday lenders. When staff members attempted to handle these matters over the phone, they were repeatedly misdirected, placed on hold or given what was determined later to be inaccurate loan balance amounts. The industry seems to make every effort to prevent the loans from being paid in full. It’s how they make their money.

If you’re asking yourself, “What can I do?” my response is to look again to the words of Pope Francis, who asks us to confront and to touch poverty. To confront this situation begins with resisting the temptation to turn our eyes away from the suffering of our neighbors, or shrugging it off as the result of financial irresponsibility that has “nothing to do with me.” The predatory lending industry very much wants us to look the other way—not to notice Lazarus at the gate.  But confronting poverty like this begins with shining a light upon it. Then there are many ways to touch this particular poverty and to take practical steps to alleviate it. One is for faithful Americans to call upon national and state legislators to initiate true reforms providing the same consumer protections afforded to those who use banks and savings and loan institutions. We must ask for a special focus on those who are already considered particularly vulnerable to the false security advertised by predatory lenders on virtually every street, but primarily advertised in our poorest neighborhoods.

In doing so you will be taking part in our Year of Mercy effort to fulfill Pope Francis’ request that we take practical steps to alleviate the unjust poverty that literally surrounds us. Surely this corporal and spiritual work of mercy is a perfect participation in this Holy Year of Mercy. What a fitting conclusion it would be if we could initiate the liberation of our poorest neighbors from this cruel shackle of crushing debt.

Most Rev. Edward J. Weisenburger is the bishop of Salina, Kan.

Monday, October 31, 2016

Payday lenders as modern-day loan sharks and the fight by people of faith to #StopTheDebtTrap

Payday lenders as modern-day loan sharks and the fight by people of faith to #StopTheDebtTrap

By Stephen K. Reeves
Stephen K. Reeves is the advocacy coordinator for the Cooperative Baptist Fellowship.
Stephen K. Reeves is the advocacy coordinator for the Cooperative Baptist Fellowship.

Throughout most of our history, payday and auto-title lenders  were called loan sharks and were operating on the wrong side of the law. Such exploitation of the vulnerable was understood as immoral and considered far outside legitimate business practices.

Only since the 1990s have these predatory lenders found ways to evade or amend state usury laws and offer loans at rates of 400% APR and above. During this period, the industry has ballooned to become a multi-billion-dollar a year business with more than 16,000 storefronts nationwide.
But for as long as these institutions have been in operation, in states across the country, people of faith and community activists have been raising the alarm, calling for reform and seeking a return to traditional usury laws.

Perhaps no other issue today epitomizes both the worst and best of our current political system.
According to countless observers, studies and reports, this industry is not built upon expensive, emergency small-dollar, short-term loans given to risky borrowers. Instead, the heart of the payday business model is creating intentional debt-traps which profit most when their customers fail.
A large percentage of borrowers end up in a cycle of debt by paying fees and interest that only buys more time to pay a lump sum, never reducing what they owe. Others pay off the loan only to realize the resulting hole in their budget leaves it impossible to make it to the next payday without another loan.

In fact, according to a nationwide study of 15 million transactions by the Consumer Financial Protection Bureau, 75% of all fees generated from these loans come from the 45% of borrowers who end up in 11 or more loans in a 12 month period.

Lenders and the elected officials that defend these practices represent the worst of our current political climate. They often point out that borrowers sign a contract so lenders are due whatever fees and interest rate has been agreed to. By not considering the undue leverage a lender has over a desperate borrower, such a position declares the free market as the ultimate arbiter of morality.
This unrestrained capitalism — unencumbered by moral considerations — inevitably leads to a number of unacceptable results; child labor being a prime example. Similar thinking on Wall Street led to the Great Recession of 2008.

The payday lending industry takes advantage of fellow citizens by setting up a system where borrower failure leads to lender success and profit. Neighbors at the end of their rope are nothing more that potential profit.

Add on top of that the corrupting influence of industry money and it is a perfect demonstration of the worst in our political system. Generous political contributions — to politicians from both parties — and millions of dollars spent on lobbyists at the state and national levels often effectively overwhelm the voice of those calling for reform and borrowers who are already politically marginalized.

In another sense, the fight to reform this industry represents the best of our political potential.
Champions for change, particularly at the state level, have shown incredible and rare bipartisan cooperation. This has been the case in Alabama, Kentucky and Arizona, among others. In Texas, ultra-conservative Tom Craddick, the Republican former Speaker of the House from Midland, teamed up with liberal heroine, former Senator Wendy Davis to push for reform.

Ten years ago, in our nation’s capital, the bipartisan Military Lending Act (MLA) was signed into law by President George W. Bush. The MLA limited the interest rate for payday and auto-title loans to 36% APR to active duty members of the military and their families.

Reform efforts at the state and federal levels have resulted in broad coalitions spanning typical ideological and theological lines. These have included not only consumer rights, legal aid and civil rights groups, but social service providers and a broad swath of the faith community.

In 2015, a new coalition called Faith for Just Lending was launched to support national reform, with a large and diverse list of members including the Cooperative Baptist Fellowship, The Ethics and Religious Liberty Commission of the Southern Baptist Convention, U.S. Conference of Catholic Bishops, National Association of Evangelicals, PICO and the National Baptist Convention, USA, among others.

Banding together to oppose exploitation of the financially vulnerable certainly represents the best of what active and faithful public witness can look like.
When reform efforts have failed in state legislatures, advocates have turned to creative political solutions. In some places, including Texas, this has meant passing local ordinances at the city level. This fight, and the central role people of faith played in it, is on display in the excellent new documentary titled “The Ordinance.”

At the federal level the fight for fair and responsible lending practices led to the passage of Dodd-Frank and the creation of the Consumer Financial Protections Bureau (CFPB). This new, independent consumer watchdog — insulated from many of the corrupting elements of the campaign and lobby dollars — was given specific authority to reign in the abuses of payday and auto title lenders, and they’ve proposed a new rule to do just that.

The aim of the rule is to insure lenders are not setting borrowers up to fail and instead are making efforts to assess a borrower’s ability to repay without getting caught paying endless fees to extend the loan, or falling into an trap of repeated loans.

While the proposal goes a long way to improving the situation for borrowers in states with lax laws, for advocates working for decades for reform the rule is not strong enough.

During the recent public comment period that concluded October 7, it is estimated that the CFPB received more than one million comments. Thousands of comments from people of faith all over the country and across the political and theological spectrum were among those voices speaking out.

While the work and debate on predatory lending and the ultimate fate of the CFPB continues, a united front of passionate faith leaders engaging in advocacy on behalf of some of the most financially vulnerable neighbors exemplifies a positive development in the midst of troubled times. By broadening the list of “moral” concerns and taking on some of the worst elements of the system, people of faith represent some of the best. 

Stephen K. Reeves serves as the associate coordinator for partnerships and advocate for the Cooperative Baptist Fellowship. Learn more about CBF’s advocacy efforts at www.cbf.net/advocacy.
CBF is a Christian Network that helps people put their faith to practice through ministry eff­orts, global missions and a broad community of support. Learn more at www.cbf.net.

Tuesday, October 11, 2016

Prepaid Credit Cards Rule from Consumer Finance Protection Bureau

CFPB logo
October 5, 2016
CONTACT:Office of CommunicationsTel: (202) 435-7170
Prepared Remarks of Richard CordrayDirector of the Consumer Financial Protection Bureau
Prepaid Accounts Rule Press Call
Washington, D.C.
Thank you for joining us on this call. The Consumer Financial Protection Bureau today has finalized a new rule providing strong federal consumer protections for prepaid account users.
Prepaid accounts are among the fastest growing consumer financial products in the United States. One common form is the “general purpose reloadable” card, easily available at any number of stores or online. Consumers can load money onto these cards and use them for everyday purchases, just as they do with a bank account and a debit card. Prepaid accounts may also be loaded with funds by a third party, such as an employer.
The amount consumers put on general purpose reloadable cards grew from less than $1 billion in 2003 to nearly $65 billion in 2012. And the total value loaded onto them is expected to nearly double to $112 billion by 2018. These accounts can be used to make payments, store funds, withdraw cash at ATMs, receive direct deposits, or send money to others. This market also includes a growing number of mobile or electronic prepaid accounts, such as PayPal or Google Wallet, which can also be used for a wide range of transactions.
Before today, however, many of these products lacked strong consumer protections under federal law. Our new rule closes loopholes and protects prepaid consumers when they swipe their card, shop online, or scan their smartphone. Among the key new requirements that financial institutions must meet are these: (1) they must limit consumer losses when funds are stolen or cards are lost; (2) they must investigate and resolve errors that occur; and (3) they must give consumers free and easy access to their account information. The Bureau also has finalized new “Know Before You Owe” disclosures for prepaid accounts that give consumers the clear information they need, up front, about the fees they can be charged and other key details.
In addition to these requirements governing prepaid accounts, financial institutions must offer protections similar to those for credit cards if they allow a prepaid account to be used to access certain credit extended by the institution, its affiliates, or its business partners. These protections would apply when a prepaid card can be used to cover a transaction even though the account lacks sufficient funds, with certain exceptions.
The new rule applies to traditional prepaid cards, as well as mobile wallets, person-to-person payment products, and other electronic accounts that can store funds. The rule also covers: payroll cards; student financial aid disbursement cards; tax refund cards; and certain federal, state, and local government benefit cards, such as those used to distribute social security benefits and unemployment insurance.
Many of these important protections stem from the Electronic Fund Transfer Act, and they are intended to be similar to those for checking account consumers. For instance, error resolution rights will now be similar for both types of accounts. If consumers are hit with what they believe are unauthorized or fraudulent charges, their financial institution must investigate and resolve these incidents in a timely way. Where it turns out to be appropriate, they must restore the missing funds. Consumers will also now generally have limited liability for any withdrawals, purchases, or other transactions made on a lost or stolen prepaid card.
The new disclosures specified in the rule will give consumers easy-to-understand information about prepaid accounts right up front. Currently, some information is hard to find online or is not revealed until you open the packaging, which makes it hard to comparison shop. So the new rule sets an industry-wide standard on fee disclosures for prepaid accounts. This will simplify, organize, and present key information consistently so people can easily understand and act on it. This is much like the approach we have taken with “Know Before You Owe” disclosure forms for mortgages.
A separate part of the rule provides strong credit-related protections that stem from the Truth in Lending Act. These protections are for consumers who want the option to access credit in the course of conducting transactions with their prepaid cards so that they can spend more money than they have in the prepaid account. In situations where prepaid users are accessing credit within a transaction that is offered by the issuer, its affiliate, or its business partner, they must receive protections similar to those afforded to credit card users under federal law. These protections include underwriting requirements, detailed periodic statements, limitations on late fees and charges, and restrictions on the amount of fees that can be imposed in the first year that the credit is extended. To further separate prepaid accounts and any credit feature that is offered, companies must observe a 30-day waiting period before offering such credit to newly registered prepaid consumers.
The new prepaid rule will generally apply to prepaid accounts starting in October 2017. To make it easier to comparison shop among different products, prepaid account issuers must publicly post agreements for accounts they offer to the general public on their websites. They must also generally submit all their agreements to the Bureau, for posting on our website, starting in October 2018.
These important new protections fill gaps in the law for consumers. The rapidly growing ranks of prepaid users deserve a safe place to store their money and a practical way to carry out their financial transactions. And though many prepaid companies already offer some of these same protections to their customers, it is vital for all consumers to have the settled assurance that these protections are now the law of the land. Thank you.

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

Wednesday, September 21, 2016

ND Child Poverty Data Highlights Local Racial Disparities

ND Child Poverty Data Highlights Local Racial Disparities

New census data shows North Dakota saw the biggest drop in child poverty, but large disparities still exist, especially for Native populations. (iStockphoto)
September 20. 2016
New census data shows North Dakota saw the biggest drop in child poverty, but large disparities still exist, especially for Native populations. (iStockphoto)
BISMARCK, N.D. - North Dakota had the biggest drop in the country's child-poverty rate, but child well-being experts say there's more work to do, especially for Native families. The census data shows North Dakota saw a 20-percent drop in the state's child-poverty rate from 2011 to 2015.

Experts point to the state's low unemployment rate and recent oil boom as reasons behind the drop, but that number continues to be higher than before the recession in 2008. And Karen Olson, the program director with North Dakota Kids Count said the statewide numbers can mask the disproportionately high rates of unemployment and poverty among the local Native American population.

"Our youth within our tribal nations are five times more likely to be impoverished than children living elsewhere in North Dakota," she said. "So, there are some challenges, there are some struggles that we need to be focused on."

Olson suggested the state could help close the gap in those disparities by making more investments or expanding early-childhood home visiting programs, which she said can help prevent child abuse and neglect and increase educational opportunities.

Nationally, unemployment has continued to decline since the recession. But Laura Speer, the associate director of policy reform and advocacy with the Annie E. Casey Foundation expects that the child poverty rate would also improve faster, because both rates typically track close together.

"It's taken awhile for the child poverty rate to really make any headway, and in fact, we're still higher today at 21 percent than we were in 2008 when the child poverty rate was 18 percent," she said.

According to new research from North Dakota Kids Count, the state's child population is growing faster than any other state in the country. Olson said that's one more reason to expand on existing programs aimed at helping families.

"Programs like Head Start that address both the needs of the child and the parent by increasing school readiness among young children, with the assumption that a healthy home will continuously benefit children throughout their development," she added.
Brandon Campbell/Shaine Smith, Public News Service - ND

Tuesday, September 20, 2016

Why Wells Fargo got away with it for so long

September 20, 2016, 10:15 am

Why Wells Fargo got away with it for so long

By Robert Weissman and Lisa Donner, contributors
Getty Images
Wells Fargo's scandalous practice of secretly opening more than 2 million sham deposit and credit card accounts dragged on for at least five years.
How did Wells Fargo get away with it for so long?
A big part of the story: Wells Fargo contract provisions blocked consumers from suing the bank in court. It's past time to prohibit the "ripoff clauses" that prevent consumers from enforcing their most basic legal rights.
Like most big banks and many other corporations, Wells Fargo buries ripoff clauses in the fine print of its customer contracts. These provisions, also known as "forced arbitration" clauses, prevent consumers from suing over wrongdoing in court and prohibit consumers from banding together in class actions. Instead, ripoff clauses force consumers to seek redress in private arbitration, on an individual basis.
So when lots of consumers have suffered small harms — as was the case with Wells Fargo — there's nothing they can do. It's generally not worth the time and money to bring a case individually, and there's a disincentive to proceed in arbitration, where claims are decided by a private firm handpicked and paid by the corporation rather than a judge or jury. Effectively, banks and other corporations are free to rip off their consumers without fear of being held accountable in court.
The problem isn't just that aggrieved consumers don't have access to a remedy. Keeping cases out of court means abuses are kept out of the spotlight.
That's exactly what happened with Wells Fargo, and why the abuses could go on so long.
Indeed, more than three years ago, a Wells Fargo customer named David Douglas sued in California, contending that the bank's employees and branch managers "routinely use the account information, date of birth, and Social Security and taxpayer identification numbers ... and existing bank customers' money to open additional accounts." Douglas alleged that branch managers opened at least eight accounts in his name and created fake business accounts under his name without his knowledge.
This case should have gone to court but was blocked by a ripoff clause. Douglas's lawyers argued that an arbitration provision in a legitimate account agreement should not bar him from suing over a sham account he never agreed to open. However, citing recent 5-4 U.S. Supreme Court decisions, the judge held that the ripoff clause in the original agreement blocked him from suing Wells Fargo.
In 2015, another Wells Fargo customer, Shahriar Jabbari, tried to file a class action against the bank, claiming that employees hid fees, refused to close accounts on request, and forged signatures and addresses. Wells Fargo publicly denied these allegations. Again, the judge ruled that the ripoff clause in the original account agreement forced any unresolved disagreement into arbitration, and Jabbari's class action was kicked out of court.
Had these early cases been allowed to proceed, others almost certainly would have followed, and Wells Fargo may have ended these pervasive abuses years ago.
Instead, it took until last week for the practices to be halted, and then only thanks to the efforts of the new Consumer Financial Protection Bureau (CFPB), the agency devised by Sen. Elizabeth Warren (D-Mass.) and adopted as part of the 2010 Dodd-Frank financial reform bill. State and federal regulators had notice of the problem at least as far back as 2013, when the Los Angeles Times first reported on Wells Fargo's fraudulent accounts. Front-line Wells Fargo workers had drawn attention to the problem, too; in April 2015, at the bank's annual shareholder meeting, Wells Fargo employees with the Committee for Better Banks submitted an 11,000-signature petition calling for an end to sales quotas that fueled fraud.
Private enforcement – individual lawsuits and class actions brought by harmed consumers — not only is a necessary complement to agency efforts, but it also often alerts agencies to the need for action.
Governmental agencies don't have the resources to police every instance of fraud. And these agencies frequently face industry smears and congressional posturing that halts or slows their ability to act.
When consumers are blocked from suing, it takes longer for agencies to become aware of a problem and is much more difficult for them to gather evidence and build a case — particularly when companies use forced arbitration to keep victims silent.
The solution: Do away with ripoff clauses. The CFPB has proposed a rule that would end the worst ripoff clauses in the financial arena, restoring consumers' right to join together in class actions to hold banks accountable for predatory behavior.
The big banks are trying to block the rule, but the Wells Fargo scandal shows exactly why the CFPB should prevail.
Weissman is president of Public Citizen. Donner is executive director of Americans for Financial Reform.

The views expressed by contributors are their own and not the views of The Hill.