Tag Archives: Center for Responsible Lending (CRL)

Newswire: $17.5 Billion returned to 200 Million defrauded consumers

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By Charlene Crowell

(TriceEdneyWire.com) – This year marks the 12th anniversary of an important consumer protection that sprang as a response to millions of foreclosures and the resulting Great Recession. Today, just as then, all consumers need assurances that whether purchasing goods or services, they pay a fair price. For the first time in our nation’s history, a federal agency’s sole role became dedicated to consumers’ financial protection.  
Since its creation, the Consumer Financial Protection Bureau (CFPB) has honored its mission by returning a cumulative total of $17.5 billion to 200 million consumers who have been harmed by violations of federal consumer financial protection law. Its Victim Relief Fund, administers the return of hard-earned monies to consumers as cancelled debts, reduced principal, and other illegal transactions.    
A second use of this same fund underwrites costs for consumer education and financial literacy outreach with two distinct constituencies: economically vulnerable consumers who want to improve their approach to money management, and recent veterans who are transitioning from service member to veteran life, as well as military widows and widowers.  
One-on-one financial coaching helps consumers learn how to manage their money more effectively and achieve their financial goals. While gaining key insights on ways to distinguish between useful financial products and frauds, consumers of different cultural, ethnic, racial, and other backgrounds become alert to scams targeted to urban and rural communities.  
Each day the CFPB receives an average of 3,000 complaints. Additionally, the agency reports that 50 million consumers have accessed its web-based database for answers to hundreds of common financial questions.  
But despite these measurable and successful efforts, many of the same organizations that opposed CFPB’s creation over a decade ago have since shifted their goals to weakening the agency in a variety of ways. Recent court filings continue to question whether the agency meets constitutional muster, while others seek to change the agency’s current independent financial status to annual Congressional appropriations. Opponents also want to change the agency’s leadership from a single director to a multi-member commission, curtail the number of businesses subject to its scrutiny, and more.  
In response to these renewed anti-consumer efforts, an 84-member coalition representing civil rights, unions, consumer advocates, antitrust and general public interest groups at the local, state and national levels sent a strong statement of support for CFPB to key committee leaders in the U.S. House and the Senate.   
“Americans see an agency responsibly undertaking the job given to it by Congress: making consumer financial markets fairer and more transparent, putting money back in the pockets of wronged consumers, and policing rules of the road that make the financial system work better for responsible businesses and consumers alike”, wrote the advocates.  
“It has required lenders who break the law to return billions of dollars directly to individuals trying to make ends meet; it is establishing a more level playing field in crucial areas of the market; and it is doing so in an accountable and transparent fashion,” the advocates continued.  
One emerging area of concern for consumers and CFPB is medical debt that impacts over 100 million Americans – accounting for a staggering $433.2 billion of out-of-pocket expenses, according to CFPB.  
“Poor medical billing and collection practices can result in patients delaying or declining needed medical care while they struggle to cope with the financial consequences of the debt burden placed upon them, even when that debt burden derives from predatory pricing, faulty, inaccurate billing, or insurance company runarounds,” noted Rohit Chopra, CFPB’s Director in a July 11 hearing on Capitol Hill. “In fact, consumers report that errors in medical billing and insurance payment are common. Among those with medical debt, more than four in ten say they received an inaccurate bill, and nearly seven in ten say they were asked to pay a bill that should have been covered by insurance.”  
“While medical payment products can offer an enticing promise of cost savings, convenient payment plans and administrative ease for medical providers, our research indicates that in many cases, patients who use these products end up worse off…Our research shows that these payment products have less favorable terms than other general credit products and can land patients with significant amounts of deferred interest. Indeed, over a three-year period, patients paid $1 billion in deferred interest on medical credit cards. This deferred interest isn’t something that’s fair or transparent — people can find themselves hit with large and unexpected interest costs even when they’ve been making payments on the bill all along,” added Chopra.  
For the Center for Responsible Lending (CRL), a nonprofit, non-partisan research and policy advocacy organization that called for CFPB’s creation, and continues to defend the embattled agency, the key difference between the CFPB and its opposition is akin to the difference between right and wrong.  
“The Bureau curbs worst practices, punishes repeat offenders, and creates a stable regulatory environment for consumer finance,” wrote CRL to a subcommittee of the House Financial Services Committee. “Inversely, those who stand to benefit from neutering the CFPB peddle in worst practices, break the law repeatedly, and seek to exploit an inconsistent regulatory environment with unsafe products and services.”  
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.  

Newswire: COVID worsen’s America’s racial wealth gap: Blacks own 22 cents for every dollar held by Whites

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Graph of average wealth

By Charlene Crowell

(TriceEdneyWire.com) – As the global pandemic continues to take lives and infect multiple generations, virtually every dimension of life is challenged. And people with the fewest financial resources before COVID-19 are being challenged more than ever before.
 
It is both a challenge and an opportunity for leadership in the Biden Administration, Congress, the Federal Housing Finance Agency, the Department of Housing and Urban Development, along with the private sector address to effect policies and practices that reverse the nation’s still-growing racial wealth gap. Tried and true wealth-building tools like targeted homeownership and expanded small business investments together would bring sustainable and meaningful changes to those who historically have been financially marginalized.
 
In an effort to better understand and solve the dual sagas wrought from centuries of racial discrimination and COVID, major universities, government agencies, public policy institutes and corporations are releasing new research that analyzes the pandemic’s added challenges that exacerbate historical racial inequities.
 
For example, from January through March of this year, Blacks on average had 22 cents for every dollar of white family wealth, according to the St. Louis Federal Reserve’s Institute for Economic Equity These substantial gaps have remained largely unchanged since 1989 to the present, according to the Institute.
 
The gap’s disparities are also reflected in findings from research conducted by Harvard University. This esteemed Ivy League institution drew a key distinction between America’s income and wealth inequalities.
 
“Income is unequal, but wealth is even more unequal,” said Alexandra Killewald, professor of sociology at
Harvard, who studies inequality in the contemporary U.S. “You can think of income as water flowing into your bathtub, whereas wealth is like the water that’s sitting in the bathtub,” she said. “If you have wealth, it can protect you if you lose your job or your house. Wealth is distinctive because it can be used as a cushion, and it can be directly passed down across generations,” providing families more choices and greater opportunity in the present and the future… white Americans are benefiting from legacies of advantage…The typical white American family has roughly 10 times as much wealth as the typical African American family and the typical Latino family.”
While the issues raised by the Federal Reserve and Harvard may sound like variations on an old theme, a 150-year-old global financial firm, Goldman Sachs, urges targeted and sustained investment by both the public and private sectors to erase America’s racial wealth gap. While the report focuses on Black women, its projected outcomes would benefit Black men as well.
“If the improvements benefit Black women and men alike, we estimate larger increases in U.S. employment of 1.7 million jobs and in U.S. Gross Domestic Product (GDP) of 2.1%, which corresponds to $450 billion per year.”
Titled, Black Womenomics: Investing in the Underinvested, the March 2021 report calls for access to capital, education, equitable earnings, health care, and housing to lay the groundwork to reverse historical disadvantages, while creating financial
independence and personal wealth. Most importantly, the report calls for the participation of Blacks – and especially Black women — to shape their own futures.
 
“[A]ny efforts to effectively address the issues can only be successful if Black women are actively engaged in formulating the strategies and framing the outcomes. Moreover, addressing discrimination and bias will be fundamental to real and sustainable progress…The large wealth gap faced by single Black women is particularly important because Black women are more and increasingly likely to be single and breadwinner mothers…Among Black mothers, more than 80% are breadwinners compared to 50% of white mothers,” states the report.
How existing financial disparities leave Black women more financially vulnerable is found in the report’s data points:
• Black women face a 90% wealth gap; 
• The wage gap of Black women widens through their whole work-life, and especially rapidly between ages 20 and 35; 
• Black women are five times more likely than white men to rely on expensive payday loans; 
• Black women are nearly three times more likely to forego prescription medicine, and also much more likely than white men not to see a doctor because they cannot afford it; and 
• The median single Black woman does not own a home, and single Black women are 24 times less likely than single white men to own a business. 
Additionally, the nation’s shortage of affordable housing translates into 85% of Black women with families facing housing costs ranging from more than 30% to 50% of their incomes. Once the monthly rent is paid, these housing-burdened households have little left to cover utilities, food, childcare or other household needs.  

Even Black families earning a median income will need 14 years just to save a 5% home down payment, according to a recent analysis by the Center for Responsible Lending (CRL).   

A legacy of historically modest incomes and little inter-generational wealth available to be passed down by families leaves most Black Americans without the comparable financial advantages enjoyed by other races and ethnicities. 

These and other circumstances lead many women – especially women of color — to turn to high-cost loans of only a few hundred dollars. Although the typical payday loan of $350 is marketed as a short-term fix to an unexpected expense, the reality for many with modest incomes is that the high-cost loan – which can come with interest as high as 400% — becomes yet another long-term financial burden that worsens financial strains with[every renewal.
 
“Predatory, high-interest lenders pull people down into financial quicksand, making them more likely to experience a range of harms, such as losing their bank account, defaulting on their bills, losing their car, and declaring bankruptcy. It is low-income consumers, and disproportionately communities of color – whom the lenders target – that are being harmed,” said Ashley Harrington, of CRL in testimony this summer before the U.S. Senate Banking Committee.
 
The harms of wealth inequality also extend to the broader U.S. economy, according to the Goldman Sachs report. In its view, expanding opportunities for Black women who are often on the bottom rung of the economic ladder can create a pathway to individual and national prosperity. “Overcoming these adverse economic trends would make for not only a fairer, but also a richer society. We estimate that confronting the earnings gap for Black women could create 1.2-1.7 million U.S. jobs and raise the level of annual U.S. gross domestic product (GDP) by 1.4-2.1% each year, or $300-450 billion in current dollars.”
 
It is time for this nation to make good on its age-old promises. Creating neighborhoods of opportunity from poverty pockets would strengthen cities and suburbs alike.  If corporate leadership would join with the Administration and Congress to ensure that Black America and other people of color share in the nation’s prosperity, everyone would be better off.
 
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.

Newswire : $349 billion COVID-19 Small Business Program short-changes businesses of color

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By Charlene Crowell, Center for Responsible Lending

Black business person in California

(TriceEdneyWire.com) – A $349 billion program created to assist America’s small businesses was launched on April 3 to provide payroll, utilities, rent and more for eligible applicants screened by the U.S. Small Business Administration (SBA). On April 16 – less than two weeks later — this national stimulus enacted in the throes of the COVID-19 pandemic, ran out of funds. In separate but related legal actions, federal lawsuits were filed, challenging the lack of equitable access to the stimulus program.
On April 19, four class action lawsuits challenged banks’ use of PPP (Payroll Protection Program) funds. Filed separately in the U.S. District Court’s Central California office, the lawsuits are against Bank of America, JP Morgan Chase, U.S. Bank and Wells Fargo.
While this legal process unfolds, the Center for Responsible Lending (CRL) estimated that as many as 95 percent Black-owned businesses stood no chance of securing a program loan. Other communities of color were similarly likely to be shut out as well: 91 percent of both Latino-owned and Native Hawaiian or Pacific Islander-owned businesses were financially shortchanged.
At the same time, businesses of color together are responsible for employing 8.7 million people and represent 30% of all U.S. businesses. Additionally, the combined contributions that these businesses make to the national economy is a noteworthy $1.38 trillion.
Days later on April 21, an additional $310 billion for the PPP was approved by the U.S. Senate and is expected to be quickly passed in the U.S. House. Even so, some reactions to the new funding suggested that it was still too little and needs to better address how Black and other businesses of color can fully participate.
“This bill distributes most of the funding again to large banks that prioritized wealthier businesses over small ones,” said Ashley Harrington, Federal Advocacy Director with the Center for Responsible Lending (CRL). “Businesses of color were locked out of round one of the SBA PPP, and this Congress proposal fails to assure that they will have fair access to the new $60 billion small business appropriation. Nor does it ensure equity and transparency by requiring data tracking on borrower demographics and loan amounts to be collected or reported.”
“While it is a good and necessary change to include set-asides for community banks to reach more businesses and rural areas, the bill fails to dedicate targeted funds for use by minority depository institutions (MDIs), and community development financial institutions (CDFIs),” added Harrington. “These are the institutions with a strong track record of serving borrowers of color. Both MDIs and CDFIs should have access to this vital small business support.”
The set-asides included in the new appropriations bill allocate monies to institutions based on bank size alone. Since over 98 percent of banks and credit unions fall into the allocation that includes CDFIs and MDIs, it is highly unlikely that these institutions will be able to access the funds – especially as the monies will have run out before these two types of institutions would be able to secure SBA approval.
The new set-asides included in the new appropriations bill allocates monies to institutions based on bank size alone. This provision places CDFIs and MDIs in direct competition with better resourced smaller institutions like community banks for loan funds.
PPP was a federal response that was supposed to supply funds through June 30 to small businesses and nonprofit organizations. It was created as part of a $2 trillion, national rescue plan authorized through the CARES Act. Instead, it is now no longer accepting applications or approving new lenders in the program. The program’s loans were capped to no more than $10 million and came with an explicit exclusion of businesses based outside of the United States. For six months, loan payments would be suspended and under specific and verifiable conditions, the loans also could be completely forgiven.
PPP applicants were required to interact with banks and other existing SBA lenders. For communities of color, this specific condition meant beginning, not continuing or expanding financial relationships. Fees paid by the federal government to participating financial institutions were based on the size of loans approved for originating program loans. For example, American Banker reported recently that on a $10 million loan, bank fees would be $100,000, and fees for a $350,000 loan would be $17,500.
Together, these two program requirements gave larger small businesses quicker and greater access to these loans. Instead of providing needed relief for struggling businesses, the PPP is just the latest iteration of federal funding and resources being systematically withheld from individuals and people of color.
A similar reaction to the exhaustion of funding was expressed by Orson Aguilar, director of economic policy for UnidosUS (formerly LaRaza) that champions rights for Latinos.
“We know that many companies did not benefit because they do not have banking relationships and that is a requirement,” said Aguilar.
Through the assistance of the Leadership Conference on Civil and Human Rights, 111 organizations across the country, including CRL, jointly told Congress their collective concerns over the exclusion of relief to communities of color in the federal pandemic response.
“Communities that have already been marginalized by structural barriers to equal opportunities and who have low levels of wealth are particularly vulnerable during this current emergency,” wrote the civil rights advocates in an April 16 letter. “While many working people have been sidelined, many others are still providing essential services during the crisis – working at our grocery stores, delivering mail and packages, and providing care to vulnerable people – putting their lives at risk, often at reduced hours and wages, to keep our country running.”
“The ongoing crisis has laid bare the structural racism and barriers to opportunity that are entrenched in our society, and our collective actions now must not worsen them,” concluded the coalition.
CRL identified specific ways in which the COVID-19 federal response can become more inclusive. Its PPP recommendations include:
Dedicate 20 percent of all new funding to businesses of color;
At least $25 billion in funding for MDIs and CDFIs;
Provide an alternative PPP loan of up to a $100,000 that can be forgiven and better fits the needs of very small businesses;
Adjust program rules to serve more small businesses and ensure equity and transparency by requiring all lenders to provide both borrower demographics and loan amounts;
Expand outreach and enrollment assistant through community development corporations and community-based organizations.
“The Great Recession drained communities of color of a trillion dollars of wealth that they have yet to recover,” concluded Mike Calhoun, CRL President. “They should not be excluded from one of the largest COVID-19 relief programs. We cannot allow that to happen again.”
Charlene Crowell is a Senior Fellow with the Center for Responsible Lending. She can be reached at charlene.crowell@responsiblelending.org.