Building Shared Prosperity from The Ground Up: Consumer Protections as the Foundation

Transcription

1 Building Shared Prosperity from The Ground Up: Consumer Protections as the Foundation Fighting Poverty Summit Shared Prosperity Philadelphia Kerry Smith Senior Staff Attorney Homeownership and Consumer Rights Unit Community Legal Services 1424 Chestnut Street Philadelphia, PA

2 Consumer Protection: A Foundation for Financial Security Financial Education Safe and Affordable Products Income & Wealth Building Opportunities PROTECT Gains made by eliminating predatory practices

3 Graphic from Center for Responsible Lending

4 Student Loan Debt

5 Student Loan Debt Student Loan Delinquency Rates by ZIP Code

6 Student Loan Debt CLS Student Loan Borrower Clients by Age Range 1% 1% 1% 3% 16% 18% 7% 18% 35% Teen 20s 30s 40s 50s 60s 70s 80s 90s

7 Student Loan Debt Challenges: Federal Loans: CLS eligible, low income borrowers almost always will qualify for an income sensitive payment that is or is near $0 Problem: loan servicers have a disincentive to enroll borrowers into these plans; and failure to do so can cause significant financial harm

8 Student Loan Debt Challenges: Private Loans: no mandated affordable repayment plans; collection through traditional means, and bankruptcy discharge is generally not available unless undue hardship Abusive For Profit Schools: defense to repayment rules in limbo

9 CFPB: Student Loan Watchdog Student Loan Ombudsman $19.1 million to be paid by a private student loan collector for improperly suing borrowers Suing the largest student loan servicer to ensure borrowers get affordable payment plans PA Attorney General s new Consumer Financial Protection Unit: our next watchdog?

10 Abusive Debt Collection Litigation Consumers are facing an explosion of predatory debt collection lawsuits. Dirty Debts Sold Dirt Cheap* Debt Buyers Unfair Practices: Filing claims with defective, inaccurate or insufficient proof of the debt. Robo signing. Collecting on time barred debt. *Dalié Jiménez, Harvard Journal on Legislation, Vol. 52 (Winter 2014).

11 Abusive Debt Collection Litigation How to collect Dirty Debts Sold Dirt Cheap: Use the courts! Do not be intimidated by the Court House. The Small Claims Court is actually going to help you make money. It is the vehicle that flushes out payment. Larry K. Neil, The Complete Guide to Buying Debt (2013), available at

12 Abusive Debt Collection Litigation Compounding the Problem: Limited access to representation. Rubber Stamp Justice Human Rights Watch calls out Philadelphia s judgeless courtrooms

13 Abusive Debt Collection Litigation CFPB sues to stop debt collection litigation abuses AG and the DA could continue to take action Court reforms

14 Threat: Predatory Payday Loans Laws Under Attack

15 Payday loans: Debt Trap By Design Traditional Balloon Payment Payday Loans: Very high fees (300 to 400% APR) Single balloon payment of principal and interest Over a very short term (typically two weeks) Secured by access to the bank account No underwriting of ability to repay without re-borrowing

16 Payday loans: Debt Trap By Design

17 Payday loans: Debt Trap By Design Long-Term Payday Loans: Debt Trap on Steroids

18 Threat: Predatory Payday Loans Payday loans cause financial distress: Fall behind on other bills Delay medical care Overdraft and lose bank accounts Bankruptcy Impair military readiness

19 Threat: Predatory Payday Loans

20 Diverse Coalition Fought Back: Saved $233 million in excessive fees and interest charges annually Stopped 1,000 payday loan storefronts from flooding into Pennsylvania

21 Federal Threat to State Protections S and H.R. 3299: Madden Bills Could Open Floodgates to Predatory Lenders: Threatens state interest rate caps. Would make it easier for payday lenders and other non banks to use rent a bank scheme to evade state interest rate caps

22 Attacks on the CFPB Payday Rule Congressional Review Act: Gives Congress, with the President s signature, a window to veto a rule from going into effect. Special provisions to expedite a vote and prevent a filibuster. If a rule is blocked by a CRA vote, the agency is forever barred from doing a substantially similar rule unless Congress authorizes it.

23 Threat: Predatory Payday Loans Action Steps: Join the coalition Contact State Legislators and PA Congressional Delegation Letters to the Editor; Op Eds Engage community groups and leaders

24 For more information Kerry Smith Senior Staff Attorney Homeownership and Consumer Rights Unit Community Legal Services 1424 Chestnut Street Philadelphia, PA

25 Opportunities to Build Power Through Consumer Protection

26 The key to adequately protecting consumers is to empower them to be in control of the marketplace.

27 CFPB by the numbers: $12 billion returned to 29 million consumers 1,242,800 complaints have been handled by CFPB as of July 1, : Cities where CFPB has held public town halls or field hearings 60+: New consumer safeguards 97%: Complaints resolved within 15 days

28 Key Enforcement Actions: 05/12/15 Sprint & Verizon: Unauthorized charges on customers cell phone bills. 09/08/16 Wells Fargo: Secretly opening unauthorized deposit and credit card accounts. 10/11/16 Navy Federal Credit Union: Made false threats about debt collection to its members, and restricted account access when members had a delinquent loan. 01/03/17 Transunion & Equifax: Deceived consumers about actual costs, and lured customers into costly recurring payments. 01/18/17 Navient Corporation: Illegally failing to provide borrowers with flexible repayment plans. 04/20/17 Ocwen Financial: Failed borrowers throughout the entirety of their mortgage servicing process.

29 WHY IS THE CFPB CONSTANTLY UNDER ATTACK? The financial industry is spending roughly $2 million per day lobbying Congress to deregulate Wall Street.

30 Consumers have strength in numbers.

31 Each has a stake Seniors Veterans Students Low income families Single mothers Single fathers Women Unemployed Underemployed Immigrants Underbanked Millenials Gen Z Servicemembers Consumers with disabilities Community Associations Community Development Organizations Faith communities Communities of color Consumers without a high school diploma Middle class families Working class families And on an on

32 THE POWER OF OUTREACH

33 THE POWER OF STORYTELLING

34 THE POWER OF COALITIONS

35 Change rests on our ability to build collective power.

36 FINANCIAL JUSTICE AND COMMUNITY EQUITY: An affirmative agenda for New York. Andy Morrison, Campaigns Director

37 New Economy Project s mission is to build a new economy that works for all, based on principles of cooperation, democracy, equity, racial justice, and ecological sustainability. We work with community groups to achieve this mission by: (1) challenging corporations that harm communities and perpetuate inequality and poverty; and (2) building strong local economies, by fostering democratically-structured, community-controlled initiatives such as worker cooperatives, community development credit unions, community land trusts, and mutual housing. We believe a world is possible in which all people live in safe, healthy, thriving communities, and that fundamental change is needed to achieve that world.

38 TWO TIERED FINANCIAL SYSTEM

39 PREDATORY LOAN SHARKS ARE CIRCLING

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41 THE BEST DEFENSE IS A GOOD OFFENSE 1. Build individual and community wealth. 2. Hold banks accountable to New Yorkers and New York communities. 3. Preserve and enhance our state s strong usury and other consumer protection laws, and keep payday and other predatory, high cost lending out of New York.

42 WE ENVISION A COMMUNITY DEVELOPMENT CREDIT UNION IN EVERY NEIGHBORHOOD. A CDCU is a credit union with a mission of serving low and moderate income people and communities. CDCUs specialize in serving populations with limited access to safe financial services.

43 BANKS MUST BE HELD ACCOUNTABLE FDIC National Survey of Unbanked and Underbanked Households How interested are banks in serving households like yours? for New York, 2015 by Selected Household Characteristics

44 WE NEED A NEW ECONOMY.

45 THANK YOU! Andy Morrison