Category Archives: Payday lending

Members of WOMEN group protest outside of congressman’s office ahead of CHOICE Act vote

Protesters swarmed a local congressman’s office Thursday carrying a big green check along with petitions.

After the James Comey hearing, the other big story out of Washington is the passing of the CHOICE Act.

With the help of a yes vote by Midland Congressman John Moolenaar, the legislation passed late Thursday afternoon in the House.

But not before some of Moolenaar’s constituents protested outside his Midland office.

The protesters are upset with the CHOICE Act, that would roll back regulations created after the 2007 financial crisis.

The House of Representatives voted yes, largely along party lines, with Republicans driving the legislation.

Members of the Women of Michigan Action Network, delivered petitions by voters who are against the CHOICE Act to Congressman Moolenaar’s office Thursday.

They claim he’s for it because he’s been given $200,000 from big banks and other Wall Street companies it would benefit.

Moolenaar didn’t respond to requests for a comment.

But a Northwood University professor, himself a former home lender, feels the home act will benefit consumers.

But opponents feel the CHOICE Act will strip the authority of the Consumer Financial Protection Bureau.

It would also make things easier for payday loan companies.

According to several news outlets, the bill will face a much tougher challenge in the Senate, where it would need Democratic support to pass.

Congressman Moolenaar released this statement on the passing of the Financial CHOICE Act:

The Financial Choice Act benefits everyday Americans by reining in Washington bureaucrats and freeing up money to invest in hometown projects. Wall Street banks that benefited during the Obama Administration oppose today’s bill because they enjoy advantages the status quo provides them over Michigan community banks and credit unions.”

Michigan United welcomes CFPB small dollar lending rules

Pledges to continue to fight to protect families from predatory lenders

lOOPHOLES
Click this image to tell the CFPB to institute strong rules for payday lenders during the public comment period.

The Consumer Finance Protection Bureau (CFPB) released their long-awaited proposed rules Thursday on small-dollar lending and officially opened the period for public comment. Michigan United, together with other members of National People’s Action across the country, took action and are speaking up, welcoming the rule and pledging to continue working to make sure the protections are as strong as possible.

Small dollar payday, auto title, and installment lenders regularly charge more than 300% interest and trap millions of families in debt each year. While some states have imposed interest rate caps and other regulations to protect consumers, the new proposed rule from the Consumer Financial Protection Bureau would be the first federal protections for small dollar borrowers.

Payday Loans and Other Debt Trap Loans Take a Toll on Michigan’s Economy.

Siphoning money out of poor communities and communities of color takes a serious toll on the economy. Money that could be spent building up local businesses or investing in communities is instead directed to never-ending fees. The negative consequences are measurable.

 

  • Payday lending in Michigan results in jobs lost and millions of dollars drained from the economy, according to a 2013 report.
  • In Michigan, 600 payday lending storefronts each issue about 3,000 loans a year. The overwhelming majority of these loans are used by the borrower to repay their prior loan.
  • Payday lenders in Michigan collected more than $103 million in payday fees in 2015 alone.

 

“We are thrilled the CFPB has finally taken action to stop the deception and abuse that run rampant in the predatory payday lending industry,” said Debbi Adams, an Economic Justice Leader with Michgian United “As the comment period opens, our members are ready to have their say and call on the CFPB to live up to its mission and protect consumers by issuing the strongest rule possible so that we can put a stop to the debt trap here in Michigan.”

“It’s such a relief to see something being done to keep these loan sharks in check.” said Perry Green, a a debt trap survivor from Detroit with Michigan United. “Between my student loans and other bills, my paycheck wasn’t stretching from month to month. A payday loan seemed like an option when I couldn’t make rent this one time because they have stores on every corner.” Green was too embarrassed to ask friends or family for another loan but ultimately had too in order to get out of the cycle of debt as he soon found himself taking out one payday loan after another to pay off the last. “I wish we had stronger rules then.  It might have saved me and my family a lot of heartache and money.”

Michigan United is joining National People’s Action in calling for a strong and broad small dollar lending rule that fulfills three basic criteria to protect American families.

  • First, the rule should require income and expense underwriting practices on all loans to ensure American consumers can affordably payback the loan.
  • Second, the rule should put a stop to the constant loan rollovers and refinances that are endemic in the industry and are hallmarks of the debt trap.
  • Finally, the rule should prevent lenders from being able to take money directly from a consumer’s bank account or hold unlimited title to their car.

“We’re clear on what we the CFPB needs to do to fulfil their mission of protecting consumers. They need to write a rule that shuts down the debt trap,” said Liz Ryan Murray, Policy Director for National People’s Action. “Time after time, we’ve seen this industry worm their way through loopholes much smaller than these. That’s why we need a rule that’s stronger than this proposal. Millions of people across the country are depending on the CFPB to get this right and we’re going to make sure the Bureau hears from them.”

Michigan United will work with other members of National People’s Action across the country to generate tens of thousands of comments to the Consumer Financial Protection Bureau from borrowers, faith and community leaders, and people of conscience calling on the CFPB to ensure the final rule contains these commonsense safeguards.

Payday loans target those with no cash

A trap of payday loan fees has some consumers borrowing money again and again. Federal regulators want to stop lenders from making some payday loans and limit how often people can take out such loans.

Detroit Free Press, June 4, 2016
 , Personal Finance Columnist 

Maybe, it’s time to admit that Dad did know best.

After talking to both sides in the battle over payday lending rules, I cannot help but go back to my father’s regulatory regime. Two words dictated his approach to managing his finances: “Pay cash.”

No one, not even the Consumer Financial Protection Bureau, is ever going to roll out that simple a rule. It would never fly as a national mandate. But it sure could help you do the math when deciding if you need to stretch a few more months out of an old TV, a clunker of a car or not-so-great tires. Do you then reconsider how much you’d borrow for a longer-term loan? Re-evaluate whether you’d attend a private college or hold down costs by going to community college a year or two and then heading to a state university?

Yes, it’s old school. And cash only sounds way too simplistic, especially when people who took out payday loans say they felt so stressed out that they didn’t have other options. But as a child, I watched my father carry a wad of cash into a store when he bought new furniture and appliances. I also saw him repair a ton of things — including watching him patch a tire — to stretch his dollar.

And frankly, going cash only is one way many consumers dig out of credit-card fiascoes. If you don’t have the cash in hand or if you know you need cash for a big bill, you just don’t buy some things. Or you shop around until you find something cheaper.

The reality is no one should ever opt to borrow money from a loan shark, even if the shark is swimming under the cover of a trade association or financial institution. But upwards of 12 million people are estimated to take out payday loans in a year, loans for $300 or $500 that can have an annual percentage rate of 391%. Roughly 16,000 lenders run storefront outfits at shopping centers and the like, as well as online.

Perry Green, 30, said he ended up spending $1,000 in fees and interest after taking out a $300 payday loan at a storefront in Detroit. Green, who now lives in Chicago and spoke last week at a press conference headed by the activist group Michigan United, said his first loan turned into a three-year debt trap after he kept taking one loan out after another to cover bills and fees. He took out the loan to cover his rent because he thought it was his only option.

Payback time for predatory payday loan practices

Nothing is easier, he argues, than offering new consumer protections by saying most people can no longer get credit, which he claims is what the CFPB essentially is trying to do.

Of course, Shaul also argues that consumers ultimately could find riskier credit — if payday lenders are forced out of business by new federal rules — by turning even more frequently to illegal offshore lenders and other more dangerous sharks.

The American Bankers Association, which represents big and small banks, found fault with the proposed CFPB rules, too.

The CFPB proposal, along with earlier regulatory actions, would make it “challenging for banks to meet the needs of the estimated 50 million consumers who access a variety of bank and non-bank small-dollar lending products each year,” the ABA said in its statement.

While the CFPB has frequently expressed interest in expanding the role for banks in the small-dollar loan market, the ABA said the proposal fails to do so in a meaningful way and will significantly limit the availability of small-dollar credit.

Some might have liked to see the CFPB simply clamp down on the triple-digit rates and sky-high fees charged by short-term, small-dollar lenders. But federal regulators do not have the authority to set interest rates. Individual states can decide if they want to limit fees and rates on payday loan and other small-dollar loan products.

“States can and should maintain strong rate caps and adopt new ones as the first line of defense against abusive lending,” said Tom Feltner, director of financial services for the Consumer Federation of America.

The Pew Charitable Trusts, which has conducted research on small-dollar loans, has an interactive online map outlining what states are doing in the payday loan regulation space.

Michigan, for example, sees 5% of the state’s population use payday loans. According to Pew’s research, Michigan is ranked as a permissive state, which means that the state has interest rates that allow payday loans to exist in the state. Pew notes that the annual percentage rate typically exceeds 300% for borrowers in Michigan.

“The CFPB’s real power to lower prices is to bring lower-cost providers, like banks and credit unions, into the market,” said Alex Horowitz, senior officer with the small-dollar loans project at Pew.

Pew researchers favored including a proposal to require that longer-term loan payments do not take up more than 5% of a borrower’s income. Pew said the 5% payment option, which was in the 2015 proposal from the CFPB, would provide the product safety standards that banks need to offer small-dollar loans at six times lower prices than payday lenders.

Given all the powerhouses with financial interests and opinions on small-dollar loans, we’re likely to hear more as the plan is open to public comment through Sept. 14. Consumer advocates, such as Michigan United, are urging consumers to voice their complaints about payday loans with the CFPB.

Yet, don’t bet on anyone mandating cash-only purchases — or for that matter, completing eliminating debt traps. It’s just not that simple. Or is it?

Contact Susan Tompor: stompor@freepress.com or 313-222-8876. Follow her on Twitter @Tompor. 

Pastors, Payday loan victims to react to release of long-awaited lending rules

Community Leaders and Advocates to Demand Strong Protections against the Debt Trap

GRAPHICMichigan United will host a telephone press conference today to respond to long-awaited proposed payday lending rules expected to be released by the Consumer Financial Protection Bureau (CFPB). The rules will be the first-ever federal regulations on the predatory small-dollar loan industry.

Michigan United is calling on the CFPB to rein in an industry that traps 12 million Americans in a devastating cycle of debt each year. This predatory industry has stripped communities of more than $10 billion since March 2015, when the bureau started the process to write rules for the industry.

During the phone conference, you will hear from the victims of the payday lending and some of Detroit’s leaders of faith as they offer their initial analysis of whether the rules are strong enough to rein in an industry known for their deceptive and abusive practices –and whether they need to be improved to truly shut down the predatory debt trap. Michigan United will continue to fight for the strong rules families deserve.

Community members will have 90 days to make sure their voices are heard.

WHAT:

Press Conference via telephone to discuss CFPB’s new payday lending rules.

WHO:

  • Perry Green, Payday loan borrower
  • Bishop Herman Starks, Christ T.R.U.T.H. International Ministries of Deliverance
  • Rev. Maurice Rudds, Greater Mt. Tabor Baptist Church
  • Debbi Adams, Michigan United Economic Justice Leader

WHEN:

3PM, June 2, 2016

WHERE:

Dial (712) 775-7035 and enter code 788747

Capitol Day 2016

Join hundreds of Michigan United leaders and allies from across the state as we take over Lansing in the name of economic, environmental, and racial justice!

Click here to register for Capitol Day 2016 NOW!

We will meet with our legislators to push for grassroots solutions to injustices our communities face. Following the meetings, we will join with allies from across the state to amplify our voices against those causing pain in our communities by carrying out a DIRECT ACTION.

Michigan United will provide buses for transportation from Detroit and Kalamazoo. Detroit will depart from 6451 Schaefer Rd, Dearborn & Kalamazoo will depart from their office at 1009 E Stockbridge Ave, Kalamazoo. A logistics email will be sent to all registered attendees a week before the event with many details, including depart times and locations.

Please click here to register if you plan to attend. A space to enter attendees’ names will appear once you choose how many places you would like to reserve. Please include the names of everyone for whom you reserve a spot.

A light breakfast and lunch will be provided. Please indicate any dietary restrictions when registering.

Childcare will also be provided. Please indicate if you will require childcare, along with their names and ages. Unfortunately, we are unable to provide childcare for children under the age of 2 years.

This is a FREE event. However, we greatly appreciate donations to help offset the costs. Click here to donate now! A donation of $60 more makes you an official member in good standing!

For additional information about Capitol Day 2016, please contact our office, 877-507-7774, ext 725 or email branden@miunited.org.

Community Members Demand Action on Payday Lending Reform

Advocates gather in Detroit to demand a strong rule from the CFPB

As winter weather sets in, community members from Michigan United, an affiliate of National People’s Action (NPA) gathered to deliver a message for Congressional leaders and the Consumer Financial Protection Bureau (CFPB): “Don’t leave us out in the cold, our families can’t wait for payday lending reform!”

The panel discussion at Michigan United’s Southwest Detroit office included Megan Kursik of the Community Economic Development Association of Michigan (CEDAM) and several Detroit residents who escaped their own payday lending nightmares, Debbi Adams, Ken Whitaker and Agena Williams.  They focused on the wealth that payday lenders strip from our communities and called for action from Congress and the CFPB.

“Each day the CFPB delays, American families lose nearly $24 million. That’s $8.7 billion each year from families who live in states like ours where these small dollar, high interest loans are allowed. That doesn’t even include online or installment lending.” Said Adams. Indeed, right here in Michigan, the average APR for a payday loan is 398%.

NPA affiliated community groups in at least 5 others states held similar events across the country to coincide with the launch of a new website, www.familiescantwait.org, which shows that payday and car title lenders have cost American families more than $7 billion since the CFPB first announced a rule to regulate the small dollar loan industry in March 2015.

While the CFPB decides what action to take, the practices of payday lenders have repeatedly landed them in Michigan courtrooms. Attorney General, Bill Schuette filed suit last week against eight companies that gave loans with triple digit interest rates for borrowers who used the title to their cars as collateral. And in September, Western Sky and Cashcall lost a class action suit for circumventing state laws regulating interest rates.

Williams was one of the 6,500 recipients of that multi-million dollar settlement. She took out a $500 loan in 2007 to pay parking tickets. When she couldn’t cover the next month’s bills, the short term loan turned into a series of longer, installment loans with numerous payday lenders. “Every day the CFPB delays, more financial damage is done to American families like mine,” said Williams. “We’re here today because our families can’t wait. We need the CFPB to implement strong rules now so others don’t go through what I went through.”

Payday lending ‘debt trap’ hits consumers

, Detroit Free Press Personal Finance Columnist January 22, 2016

Low-income consumers, seniors and others can get caught in a “debt trap” involving extraordinarily high fees and interest rates on some payday loan products.

Ken Whittaker, 41, has one of those stories about taking out a payday loan that can make your stomach flip.

One simple mistake — cashing his paycheck and pocketing the money — set off a chain of financial headaches that ultimately ended up costing him more than $7,000. It all started out with one mistake and one payday loan to cover that emergency.

Whittaker, who lives in Detroit, was working in information technology at the University of Michigan more than 10 years ago when he cashed his paycheck and put all the money in his pocket. Shortly afterward, he pulled out a twenty dollar bill from his pocket to buy his little boy a hot dog for lunch.

But somehow, the entire wad of cash fell to the ground. Whittaker didn’t realize it. He lost it all.

So Whittaker took out a payday loan for around $700 or so to cover his bills. He couldn’t pay the first payday loan off and then got another one. He had two loans out at one point that added up to more than his entire paycheck.

“This payday lending catches you in a cycle,” he said.

“I just couldn’t do it anymore,” he said of the constant building of more debt and high fees.

At one point, Whittaker decided to close his bank account so the payday lenders wouldn’t have access to his money. But that move led to collection calls and then a legal judgment against him for garnishing what money he received from his tax refund, he said.

“When it came to the refund time, I didn’t get my check,” Whittaker said. He was newly married so some of that refund belonged to his new wife who was working and having taxes withheld during the year from her paychecks. She wasn’t too happy.

“It was a very bad period in my life,” he said.

Whittaker’s story is the kind that activists want to bring to light as Washington reviews the rules surrounding payday lending. Advocacy groups want to see tighter regulations on a national level of payday lenders, which they say can prey on millennials, seniors and others who might be stretched for cash.

In March 2015, the Consumer Financial Protection Bureau said it was considering proposing rules that would end “payday debt traps” by requiring lenders to take steps to make sure consumers can repay their loans.

At that time, proposals under consideration included restricting lenders from attempting to collect payment from consumers’ bank accounts in ways that tend to rack up excessive fees.

“Too many short-term and longer-term loans are made based on a lender’s ability to collect and not on a borrower’s ability to repay,” said CFPB Director Richard Cordray in a statement a year ago.

But activists are concerned that the payday lending industry is putting the heat on and moving to prevent meaningful changes in the rules that could benefit consumers who end up caught in a “debt trap.”

Kursik spoke Friday on a payday lending reform panel with Whittaker and others at the Michigan United office in Detroit. Megan Kursik, coordinator for the Michigan Communities for Financial Empowerment at the Community Economic Development Association of Michigan in Lansing, said too often people seem to think that someone is just taking out a payday loan because they want to buy expensive electronics or some other luxury item. But she said many times people end up in a cycle of debt because of some emergency or unforeseen financial snag.

As Kursik sees it, regulations should focus on the consumer’s ability to pay back the loan. But right now, she said, the loans are made because the lender has the ability to collect directly from a bank account. To obtain a payday loan, one has to agree to give access to a bank account.

Currently, Michigan has some limits on payday lending or what the state calls a “deferred presentment transaction.” State law limits the amount a person can borrow from a payday lender to $600 with fees capped at $76.  On a $400 payday advance, for example, the fee would be $54​ and in Michigan the payday lender may charge an additional database verification fee of 45 cents per transaction.

As for consumers who run into trouble now, there are a few steps that Kursik would recommend taking. They include contacting the Michigan Department of Insurance and Financial Services, particularly if someone has had troubles with online payday lenders, where the state has seen a rush of complaints. See www.michigan.gov/difs or call 877-999-6442.

Consumers also can file complaints with the Consumer Financial Protection Bureau. See www.consumerfinance.gov/complaint.

Contact Susan Tompor: 313-222-8876 or stompor@freepress.com. Follow Susan on Twitter @Tompor.