The Grinches Who Steal Christmas

Payday lenders use the holidays to target consumers most likely to wind up in a vicious cycle of debt.

Stealing Christmas with 500 percent interest rates.

By Rebecca Thiess  

 

The holidays are upon us, and for many this is a season of financial stress and strain as well as joy – a time when the need for an extra couple of hundred dollars can seem especially acute.
For payday, title loan, and auto title lenders, that makes the holidays a season of opportunity. And many of these lenders don’t just make an extra push at the end of the year; they actually insert a holiday theme into their advertising!

Cash Title Exchange, a Mississippi-based lender, sent out a colorful direct-mail piece promising “the cash you need this holiday season” and featuring a smiling Santa Claus with an armful of presents. “Even Santa needs help,” the ad pointed out.

[SEE: Political Cartoons on the Economy]

Santa was also a co-star in a TV spot for TitleMax, based in Savannah, Georgia: “Come to TitleMax now for cold hard cash,” says the cheery announcer. “Your car title is your credit – Ho! Ho! Ho!”
What such companies don't advertise, and what many borrowers don’t know, is exactly how much money they will ultimately have to pay for the relatively small sum they receive immediately. Because such loans typically carry fees that work out to the equivalent of 300 to 500 percent in annual interest, many borrowers are forced to take out a long string of loans to cover payments on the original one. Their loan fees often end up dwarfing the amount of money they borrowed in the first place.

Targeting borrowers during the holiday season hits many when they are feeling the most vulnerable. And ads aren’t just splashed in public places, they are sent out in focused mass mailings to people who are particularly likely to respond—the elderly or those with low annual incomes.

While loans like these may be marketed as a way to deal with a one-time emergency or secure a little extra holiday cash, they routinely lead people into a cycle of long-term debt. The Consumer Financial Protection Bureau, in its research on the small-dollar loan market, has found that four out of five payday loans end up being rolled over or renewed within two weeks, with half of those becoming part of a sequence of 10 or more loans. And that is exactly the outcome these lenders are counting on: Getting people to borrow repeatedly, paying fee after fee, is their business model.

In an enforcement action against ACE Cash Express, the bureau exposed the company for using a variety of illegal tactics, including false threats of criminal prosecution, to bully its borrowers into repeatedly taking out new loans to cover the cost of old ones. A graphic from the company’s own training manual spelled out its preferred method of entrapment.

In 2015, the Consumer Financial Protection Bureau is widely expected to announce a set of proposed consumer protection rules that could change this market for the better. This should be welcome holiday news: Most Americans have a negative opinion of payday lenders. (65 percent hold an unfavorable view, versus only 15 percent with a favorable view, according to a recent national survey.)

[SEE: Editorial Cartoons on Congress]

Payday lenders are hurting Americans; but the industry has been using political contributions to safeguard its profit stream, and Congress has so far been unwilling to regulate.

A recent report by Americans for Financial Reform sheds light on exactly how much this industry is spending to exercise influence in Washington. In the 2014 election cycle, payday, auto title and installment lenders, along with other entities that play a role in their operations, reported more than $13 million in political spending, with much of that money coming from trade associations that represent the industry in Washington. Major spenders also include some of the trade associations’ big corporate members — the actual payday lenders themselves. Cash America, a company found by the Consumer Financial Protection Bureau to be using illegal debt collection tactics and overcharging service members and their families, spent over $1.7 million in the 2014 cycle on lobbying and campaign contributions.

But the next holiday season could be a bit brighter. The bureau could make lenders verify that loans are affordable in light of a borrower’s income and expenses; reduce the payday debt trap from the typical 200 days a year to no more than 90; and put borrowers back in control of their own bank accounts. The holidays are a time for joy and giving, and as the residents of Whoville know, there is no room for the Grinch.

White House Fact Sheet: Council of Economic Advisers Releases Report Highlighting New Research on SNAP’s Effectiveness and the Importance of Adequate Food Assistance

THE WHITE HOUSE

Office of the Press Secretary

FOR IMMEDIATE RELEASE

December 8, 2015

FACT SHEET: Council of Economic Advisers Releases Report Highlighting New Research on SNAP’s Effectiveness and the Importance of Adequate Food Assistance

A new report released today from the White House Council of Economic Advisers (CEA) finds that the Supplemental Nutrition Assistance Program (SNAP), formerly known as Food Stamps, is highly effective at reducing food insecurity—the government’s measure for whether households lack the resources for consistent and dependable access to food. The report highlights a growing body of research that finds that children who receive food assistance see improvements in health and academic performance and that these benefits are mirrored by long-run improvements in health, educational attainment, and economic self-sufficiency. The report also features new research that shows benefit levels are often inadequate to sustain families through the end of the month—resulting in high-cost consequences, such as a 27 percent increase in the rate of hospital admissions due to low blood sugar for low-income adults between the first and last week of the month, as well as diminished performance on standardized tests among school age children.

Each month, SNAP helps about 46 million low-income Americans put food on the table. The large majority of households receiving SNAP include children, senior citizens, individuals with disabilities, and working adults. Two-thirds of SNAP benefits go to households with children.

Today’s CEA report draws on a growing body of high-quality research about food insecurity and SNAP, finding that:

SNAP plays an important role in reducing both poverty and food insecurity in the United States—especially among children.

·         SNAP benefits lifted at least 4.7 million people out of poverty in 2014—including 2.1 million children. SNAP also lifted more than 1.3 million children out of deep poverty, or above half of the poverty line (for example, $11,925 for a family of four).

·         The temporary expansion of SNAP benefits under the American Recovery and Reinvestment Act of 2009 (ARRA) lifted roughly 530,000 households out of food insecurity.

SNAP benefits support vulnerable populations including children, individuals with disabilities, and the elderly, as well as an increasing number of working families.

·         Nearly one in two households receiving SNAP benefits have children, and three-quarters of recipient households have a child, an elderly member, or a member with a disability. Fully 67 percent of the total value of SNAP benefits go to households with children as these households on average get larger benefits than households without children.

·         Over the past 20 years, the overall share of SNAP recipient households with earned income rose by 50 percent. Among recipient households with children, the share with a working adult has doubled since 1990.

 

SNAP’s impact on children lasts well beyond their childhood years, providing long-run benefits for health, education, and economic self-sufficiency.

·         Among adults who grew up in disadvantaged households when the Food Stamp Program was first being introduced, access to Food Stamps before birth and in early childhood led to significant reductions in the likelihood of obesity and significant increases in the likelihood of completing high school.

·         Early exposure to food stamps also led to reductions in metabolic syndrome (a cluster of conditions associated with heart disease and diabetes) and increased economic self-sufficiency among disadvantaged women.

SNAP has particularly large benefits for women and their families.

·         Maternal receipt of Food Stamps during pregnancy reduces the incidence of low birth-weight by between 5 and 23 percent.

·         Exposure to food assistance in utero and through early childhood has large overall health and economic self-sufficiency impacts for disadvantaged women.

The majority of working-age SNAP recipients already participate in the labor market, and the program includes important supports to help more recipients successfully find and keep work.

·         Fifty-seven percent of working-age adults receiving SNAP are either working or looking for work, while 22 percent do not work due to a disability. Many recipients are also the primary caregivers of young children or family members with disabilities.

·         SNAP also supports work through the Employment and Training program, which directly helps SNAP beneficiaries gain the skills they need to succeed in the labor market in order to find and retain work. During fiscal year 2014, this program served about 600,000 SNAP recipients.

Even with SNAP’s positive impact, nearly one in seven American households experienced food insecurity in 2014.

·         These households—which included 15 million children—lacked the resources necessary for consistent and dependable access to food.

·         In 2014, 40 percent of all food-insecure households—and nearly 6 percent of US households overall—were considered to have very low food security. This means that, in nearly seven million households, at least one person in the household missed meals and experienced disruptions in food intake due to insufficient resources for food.

 

While SNAP benefits allow families to put more food on the table, current benefit levels are often insufficient to sustain them through the end of the month, with substantial consequences.

·         More than half of SNAP households currently report experiencing food insecurity, and the fraction reporting very low food security has risen since the end of the temporary benefits expansion under ARRA.

·         New research has linked diminished food budgets at the end of each month to high-cost consequences, including:

o    A drop-off in caloric intake, with estimates of this decline ranging from 10 to 25 percent over the course of the month;

o    A 27 percent increase in the rate of hospital admissions due to low blood sugar for low-income adults between the first and last week of the month;

o    An 11 percent increase in the rate of disciplinary actions among school children in SNAP households between the first and last week of the month;

o    Diminished student performance on standardized tests, with performance improving only gradually again after the next month’s benefits are received.

Administration Efforts to Build on Progress

To reduce hunger and improve family well-being, the Obama administration has been and remains dedicated to providing American children and families with better access to the nutrition they need to thrive. These investments make a real and measurable difference in the lives of children and their families, and ensure a brighter, healthier future for the entire country.

Through the Recovery Act, the Administration temporarily increased SNAP benefits by 14 percent during the Great Recession to help families put food on the table.  Reports indicate that food security among low-income households improved from 2008 to 2009 amidst a severe recession and increased unemployment; a significant part of that improvement is likely attributable to SNAP.

The Administration has also developed several initiatives to improve food security and nutrition for vulnerable children.  Through the Community Eligibility Provision, schools in high-poverty areas are now able to offer free breakfast and lunch to all students with significantly less administrative burden. Recent revisions to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) added a cash benefit to allow participants to purchase fruits and vegetables, a change that substantially increased the value of the package. The Administration also has expanded access for low-income children to nutritious food during the summer months when school meals are unavailable and the risk of food insecurity is heightened. The results of these efforts have been promising. In 2014, the U.S. Department of Agriculture (USDA) delivered 23 million more summer meals than in 2009.  And the Administration has successfully implemented Summer Electronic Benefits Transfer for Children (SEBTC) pilots, which provide additional food assistance to low-income families with children during the summer months. These pilots were found to reduce very low food security among children by 26 percent.  The President’s 2016 Budget proposed a significant expansion of this effort.

Finally, this Administration has provided select states waivers to test ways of reducing the administrative burdens of SNAP for elderly households, a population that continues to be underserved. After seeing positive results in participating states, including an increase of elderly participation by more than 50 percent in Alabama, the President’s 2016 Budget included a proposal to create a state option that would expand upon these efforts to improve access to SNAP benefits for the elderly.

New Data Reveals High Unbanked, Underbanked Rates in Localities across America

By Kasey Wiedrich

According to the latest estimates published in CFED’s Assets & Opportunity Local Data Center, one in every nine households (11%) in American cities with 200,000 or more residents are unbanked, meaning that they have neither a checking account nor a savings account. This figure is significantly higher than the national average of 7.7% for all households—roughly one in every 14 households.

Without a bank account to store and accrue earnings, unbanked households lack even the most basic tools through which to build a safety net for emergencies, and are effectively shut out of the economic mainstream. Additionally, one in every five (20%) households in major cities is underbanked, meaning that while they have access to a bank account, these households still use alternative financial services, like money orders or high-cost short-term loans, to manage their finances. Family Assets Count, a partnership between CFED and Citi Community Development, is putting national data in the hands of local decision-makers to advance solutions to this issue.

Through the Family Assets Count project, CFED used the latest biennial Survey of Unbanked Households from the FDIC to develop new estimates of household financial access for cities and counties across the country, updating data previously released in 2014. These estimates provide a glimpse into the factors that influence a household’s banked status, and illustrate the pervasiveness of—and need for comprehensive solutions to—the nation’s financial access crisis.

Of major U.S. cities, Newark, NJ, has the highest unbanked rate, with 23.3% of its households identified as unbanked. Detroit has the second-highest rate with 19.9% unbanked. These positions are reversed for underbanked rates: at 28.5%, Detroit has the highest underbanked rate of all American cities with a population greater than 200,000 people, while Newark has the second-highest rate, at 26.9%. Newark and Detroit also had the highest unbanked and underbanked rates, respectively, among major cities in 2011.

These findings point to the need for solutions that address the financial vulnerabilities facing households across the country, especially households of color, those with low incomes and those without postsecondary degrees.

To find out about how families are faring on these measures in your city, visit the Assets & Opportunity Local Data Center. For more on how some groups are using this data, visit FamilyAssetsCount.org.

The Consensus Council, Inc. receives $20,000 award from Tom's of Maine for NDESPA

                                   

FOR RELEASE:             December 3, 2015

CONTACT:       Scott Fry, Senior Program Director

                        The Consensus Council, Inc.

                        701.224.0588, ext. 106

The Consensus Council, Inc. receives $20,000 award from Tom’s of Maine

As part of the 50 States for Good initiative, The Consensus Council, Inc. of Bismarck, ND (http://agree.org) is one of 50 states and the District of Columbia to win a $20,000 award from Tom’s of Maine to support grassroots community goodness.

Tom’s of Maine (http://www.tomsofmaine.com/home) serves customers personal care needs with imaginative science from plants and minerals, works to inspire those they serve with a mission of responsibility and goodness, empower others by sharing knowledge, time and talents and profits, and help to create a better world by exchanging faith, experience and hope.

“This funding will help to advance the work of the North Dakota Economic Security & Prosperity Alliance whose mission is to help North Dakotans of low and moderate income to build assets for the future” said Rose Stoller, Consensus Council Executive Director.

The NDESPA coalition began in 2008 and works to build and sustain a system of economic security for all through poverty awareness and education, grassroots and community capacity-building, research and data development and promotion of policies and practices to eliminate disparities and obstacles for achieving economic security.

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