Consumer Lending Reform

Woodstock Institute identifies the negative effects of high-cost consumer credit and works to end the worst practices among payday lenders, installment lenders, and other consumer lenders.

October 14, 2011
By Mary Ellen Podmolik October 14, 2011   Many consumers applying for a mortgage are going to start sharing more personal information with lenders next year, like it or not.   FICO scores, the industry standard for determining credit risk in mortgages backed by Fannie Mae, Freddie Mac and the...
September 19, 2011
By Karen Harris September 19, 2011   We have all heard the catchy FreeCreditReport.com jingles on TV, but have we really stopped to think about how credit information is used and how it is dividing the country? Due mainly to the recent fiscal crisis, 25 percent of Americans had low credit scores...
August 22, 2011

One of the exciting aspects of the Consumer Financial Protection Bureau (CFPB), which opened its doors on July 21, is that we finally have a federal regulator for non-bank financial institutions, like independent mortgage lenders and payday lenders. But the CFPB will not have the authority the regulate other non-bank financial institutions, like consumer finance companies, debt settlement companies or prepaid card providers unless it finds that they are larger participants in the market. It’s heartening to see that one of the CFPB’s first orders of business is to define the scope of non-bank financial institutions it will regulate so it can get to work protecting consumers regardless of where they conduct their financial business.

July 8, 2011

We’ve been pushing for stronger protections on overdraft protection loans for years, and the Office of the Comptroller of the Currency (OCC), a federal bank regulator, recently released a proposed guidance that would eliminate some of the worst features of overdraft programs-such as ordering transactions to maximize fee income.  However, the proposed rule has a glaring flaw—it puts  bank-based payday loans, also known as deposit advance loans, in the same category as overdraft loans. Bank payday loans and overdraft loans are entirely different beasts—they’re structured differently, used for different purposes, and have different risks. The two products need regulations tailored to their unique characteristics. We recently submitted our comments on these rules; you can send regulators your thoughts until August 8, 2011.

June 30, 2011
By Sam Worley June 30, 2011 It's a dirty word now, but subprime—as in the dubious lending practices blamed for the recent financial crisis—entails, most simply, extending credit to those who don't often have access to it. People who have low credit scores or no credit history are subprime...
Bridging the Gap II
May 3, 2011

This fact sheet highlights findings and recommendations from "Bridging the Gap II: Examining Trends and Patterns of Personal Bankruptcy in Cook County’s Communities of Color." The report found that women make up a larger share of individual bankruptcy filers in all communities, and a dramatically larger share in African American communities, than men do.

Bridging the Gap
April 29, 2011
This report examined geographical, gender-related, and chapter choice trends in data from federal bankruptcy courts in Cook County. It found that women make up a larger share of individual bankruptcy filers in all communities, and a dramatically larger share in African American communities, than men do.
April 1, 2011

Debt protection and credit insurance are high-cost, low-value products that are poorly understood by consumers and inadequately monitored by regulators. The new Consumer Financial Protection Bureau created by the Dodd Frank Wall Street Reform and Consumer Protection Act should shed some light on these often shady products.

March 21, 2011

On Friday, March 18th, Circuit Court Judge Carolyn Quinn ruled that Illinois Lending Corporation (plaintiff) did not meet the standards for issuing a Temporary Restraining Order (TRO).

March 16, 2011

This week, the payday lender Illinois Lending Corp. filed a lawsuit challenging portions of a new law that enacts many necessary consumer protections for small consumer loan borrowers. Specifically, the suit challenges provisions of the law that prevent lenders from holding a license for shorter-term payday loans in addition to a license for longer-term consumer installment loans. The lawsuit coincides with the introduction of a bill authored by Rep. Daniel Burke that would remove the dual license restriction, scheduled for a hearing in front of the Illinois House Executive Committee tomorrow.

January 6, 2011

2010 was a heartening year for consumer advocates working to eliminate income tax refund anticipation loans (RALs), the high-cost loans that strip assets from low-wealth tax filers. First, the Office of the Comptroller of the Currency (OCC), the federal regulator of national banks, issued a policy statement regulating the provision of RALs that strengthened its hand compared to previously unenforced policies. On the heels of that announcement, Chase announced it was leaving the RAL business. Chase was the second of the three major banks who provided RALs to withdraw, following Santa Barbara Bank & Trust’s forced exit in 2009. In August, the IRS announced it would stop facilitating the preparation of RALs by providing information on a borrower’s debts to tax preparers. Finally, the year ended with more happy news: the OCC ordered the third main RAL provider, HSBC, to stop providing RALs, leaving H&R Block without a bank partner for the upcoming tax season. Republic Bank and Trust, an FDIC-regulated bank that is currently the last bank around to provide RAL financing, is even limiting the amount of funding available to its RALs, including those arranged by Jackson Hewitt. With few financing options left for tax preparers who want to make wealth-stripping loans to working families, this could be the beginning of the end for RALs as a meaningful market.

January 6, 2011

2010 was a heartening year for consumer advocates working to eliminate income tax refund anticipation loans (RALs), the high-cost loans that strip assets from low-wealth tax filers. First, the Office of the Comptroller of the Currency (OCC), the federal regulator of national banks, issued a policy statement regulating the provision of RALs that strengthened its hand compared to previously unenforced policies. On the heels of that announcement, Chase announced it was leaving the RAL business. Chase was the second of the three major banks who provided RALs to withdraw, following Santa Barbara Bank & Trust’s forced exit in 2009. In August, the IRS announced it would stop facilitating the preparation of RALs by providing information on a borrower’s debts to tax preparers. Finally, the year ended with more happy news: the OCC ordered the third main RAL provider, HSBC, to stop providing RALs, leaving H&R Block without a bank partner for the upcoming tax season. Republic Bank and Trust, an FDIC-regulated bank that is currently the last bank around to provide RAL financing, is even limiting the amount of funding available to its RALs, including those arranged by Jackson Hewitt. With few financing options left for tax preparers who want to make wealth-stripping loans to working families, this could be the beginning of the end for RALs as a meaningful market.

December 23, 2010
By Becky Yerak December 23, 2010 Bank regulators are getting extra tough about what they believe are onerous overdraft policies, and that's welcome news to Angela Castro. The Newburyport, Mass., resident says she remembers when banks tried to cover as many small checks as possible before hitting...
December 16, 2010

On a cold Monday morning under a persistent snowfall, strains of holiday carols could be heard outside of a Chicago payday loan store. These were not your usual carols celebrating sleigh rides, mistletoe, and peace on Earth; indeed, these carols had a less cheery message.

December 7, 2010

Remember the story of the Grinch? He’s the green creature with a heart two sizes too small who stole holiday presents and good cheer from the unsuspecting citizens of Whoville. We’re kicking off a campaign to warn against a slightly different species of Grinch that poses a danger during the holiday season: the Payday Grinch.

October 5, 2010

Since 1977, the Community Reinvestment Act (CRA) has been an effective tool to ensure that financial institutions live up to their community investment obligations, but many of the opportunities for public input on how a bank served the community’s needs only occur when a bank applies to merge with another bank.  The past decade has seen considerable industry consolidation, resulting in fewer merger opportunities for public input. As a result of the ongoing financial and foreclosure crisis, the few large mergers that have occurred were the result of financial insolvency and have taken place on an emergency basis, with no public input for consideration of the merged institutions’ community investment commitments.
Under the American Community Investment Reform Act, a proposal to modernize the CRA introduced by Rep. Luis Gutierrez (D-4), the public would be able to more effectively hold financial institutions accountable for their community development practices and the financial products they offer.

October 5, 2010

Since 1977, the Community Reinvestment Act (CRA) has been an effective tool to ensure that financial institutions live up to their community investment obligations, but many of the opportunities for public input on how a bank served the community’s needs only occur when a bank applies to merge with another bank.  The past decade has seen considerable industry consolidation, resulting in fewer merger opportunities for public input. As a result of the ongoing financial and foreclosure crisis, the few large mergers that have occurred were the result of financial insolvency and have taken place on an emergency basis, with no public input for consideration of the merged institutions’ community investment commitments.
Under the American Community Investment Reform Act, a proposal to modernize the CRA introduced by Rep. Luis Gutierrez (D-4), the public would be able to more effectively hold financial institutions accountable for their community development practices and the financial products they offer.

October 5, 2010

Since 1977, the Community Reinvestment Act (CRA) has been an effective tool to ensure that financial institutions live up to their community investment obligations, but many of the opportunities for public input on how a bank served the community’s needs only occur when a bank applies to merge with another bank.  The past decade has seen considerable industry consolidation, resulting in fewer merger opportunities for public input. As a result of the ongoing financial and foreclosure crisis, the few large mergers that have occurred were the result of financial insolvency and have taken place on an emergency basis, with no public input for consideration of the merged institutions’ community investment commitments.
Under the American Community Investment Reform Act, a proposal to modernize the CRA introduced by Rep. Luis Gutierrez (D-4), the public would be able to more effectively hold financial institutions accountable for their community development practices and the financial products they offer.

September 7, 2010

In response to some of the recent criticism of the consumer reporting service mandated by the landmark payday loan reforms passed last spring, I would like to provide a brief history of payday loan reform in Illinois and why this database is so critical to protecting consumers.

August 12, 2010

Tax preparers who arrange refund anticipation loans (RALs)—high-cost loans secured by a taxpayer’s expected income tax refund—have long relied on the IRS to provide information on any outstanding debts, such as back taxes or child support, that will be withheld from the borrower’s tax refund. This information, called the “debt indicator,” allows tax preparers to underwrite RALs and facilitates an industry that strips $114 million from Illinois taxpayers. In a huge victory for consumers, the IRS announced that it would stop providing the debt indicator to tax preparers.

June 22, 2010
By David Morrison June 22, 2010 Another state has passed a law capping interest on payday loans. Beginning in March, 2011, loans with terms of six months or less may not be priced at rates of greater than $15.50 per $100 borrowed every two weeks.  The new law also requires that a payday loan...
June 22, 2010
By Becky Yerak June 22, 2010 Chicago’s two biggest banks have diverging strategies on how to treat customers who overdraw their accounts using ATM and debit cards. Starting July 1 for new customers and Aug. 15 for existing ones, banks need a consumer’s approval to process everyday debit and ATM...
June 21, 2010

In a crackdown on 700 percent interest rate payday loans, Governor Quinn signed HB 537, capping rates and closing the legal loophole that has allowed some payday loan companies in Illinos to operate almost completely unregulated.  Starting in March 2011, the law caps rates for nearly every short-term credit product in the state, prevents the cycle of debt caused by frequent refinancing, and gives regulators the tools necessary to identify potentially predatory lending practices before they become widespread.

June 21, 2010
By Kurt Erickson June 21, 2010 Gov. Pat Quinn signed legislation Monday aimed at reining in high interest rates charged by payday lenders. Under the measure, interest rates charged by consumer finance companies would be capped at 99 percent. The law is the result of talks between consumer groups...
June 21, 2010
By Juan-Pablo Velez June 21, 2010 Governor Pat Quinn on Monday signed a landmark payday loan reform bill closing a legal loophole that had kept much of the industry unregulated. In 2005, the Illinois General Assembly passed the Payday Loan Reform Act, which capped interest rates on payday loans...
June 21, 2010
June 21, 2010 Gov. Pat Quinn sign signed a new law Monday that is designed to protect people from predatory payday loans. Under current law, there are no limits on how much loan companies charge in interest. The new legislation would cap those rates at 99 percent for loans up to $4,000 and...
June 7, 2010

More women will declare bankruptcy than get college degrees this year. Over one quarter of U.S. households are unbanked or underbanked, and 85 percent of these consumers are people of color. For every dollar that white Americans have, Latinos have 12 cents and African-Americans have 10 cents.

May 31, 2010

High-cost consumer credit, extended with no consideration of a borrower's ability to pay it back, has stripped billions in wealth from Illinois communities since the beginning of the economic crisis. While lending reform is still being debated in Washington, the Illinois General Assembly passed strong consumer protections designed to cap rates for the often controversial payday lending industry.

May 27, 2010
May 26, 2010   This morning, the Illinois House concurred with the Senate amendments to HB 537, legislation that would close a major loophole in the 2005 Payday Loan Reform Act. This compromise measure passed 108-1-1.  Crain's explained the underlying provisions several weeks ago: The compromise,...
May 26, 2010

Consumer advocates scored a significant victory today as the Illinois General Assembly passed strong consumer protections for high-cost installment loans and closed the payday loan loophole that allowed some payday companies to operate almost completely unregulated. As we move forward, we need your help to contact Governor Quinn and ask him to sign HB537, which puts an end to 700 percent payday and payday installment loans.

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