Tag Archives: predatory lending

Trump Team Greenlights Predatory Payday Lending

New Orleans      We can count the days until we pray that’s it is over, but until then the drumbeat of woe is bound to continue.  The gutted Consumer Financial Protection Bureau proved that it really might need a name change as it announced the shelving of Obama-era reforms to payday lending which will exploit lower income consumers rather than protect them.

The Obama rule wasn’t perfect, but it was progress.  Nothing had been done about the usurious interest rates for example, but it had taken positive steps.

There were limits proposed on the number of loans borrowers could take sequentially.  Such limits are critical in blocking the predatory nature of payday lending.  They require loans to be on a common database so that desperate low-income borrowers are not robbing Peter to pay Paul for example.  A study ACORN commissioned by academics in Canada where regulating payday lending has been a major campaign of ours for the last seventeen years found that borrowers were caught in a debt trap cycle for eighteen months or more to resolve the first loan as interests, fees, and penalties pyramided throughout the period.

The second key advance of the Obama rules required an affordability test before the loans were made.  Whether payday lending, subprime lending, basic mortgages or whatever the product, the baseline for any loan to be fair to the consumer has to include an assessment of affordability.

The Trump team eviscerated both of these reforms to greenlight the industry in its continued efforts to exploit low-and-moderate income families.  All this despite CFPB whistleblowers that had documented a stacked house research effort that had been fabricated to a predetermined aim of gutting the Obama regulations.

The industry reportedly collects $30 billion in fees from this predation, making it easy for them to drop $12 million in campaign contributions to Republican lawmakers to grease the wheels.  The Community Financial Services Association of America, their trade association, is doing the happy dance because its rip-offs of lower income borrowers will be able to continue unabated.

Their only claim is that they supply last ditch credit at exorbitant prices to desperate families.  Everyone not on the take from the industry, knows that there are many better ways to provide credit that don’t trap families in permanent poverty.

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Updates on Banks as Criminal Enterprises: More Wells Fargo Mess

New Orleans   The old adage that “what goes around, comes around” applies nicely to Wells Fargo, long in our experience one of the pariahs of banking and a shameless purveyor of predatory products and lending, long a target of ACORN campaigns.  Recent years have seen their corrupt culture begin to catch up with the San Francisco-based financial institution especially when they were caught creating thousands and thousands of fake accounts in their boiler rooms.  When that shoe fell, others started flying as the bank seems to careen from one scandal to another, and every internal and external report seems to report the impacts as even worse than first revealed.

It is likely far from over.

In a story about the transactional exchanges between banks and universities, where various institutions negotiate semi-exclusive arrangements to have the first and best crack at students, Wells Fargo once again is coming in first when it comes to preying on students as well.  In a recent Wall Street Journal report “twenty-two of the 30 highest average fees” were at schools with Wells Fargo contracts, while 20 of the 30 lowest were with Pennsylvania-based PNC Financial Services by comparison.  Wells in a typically flannel-mouthed response to the reports said that their charges were higher because “some students have ‘more complex banking needs, such as sending wires or purchasing more checks.’”  Who are they kidding?  The markup on check purchases at banks is huge, and how many youngsters use checkbooks rather than cards?  Come on!  They also make beaucoup on wire transfers and remittances, so this doesn’t answer the question either.

There is a sign that the greed and fast dealing of Wells and other banks may have finally gone past the usually rubbery line drawn by the Federal Reserve with one of Janet Yellen’s final announcements as chair.   Responding to Wells as a repeat offender, the Fed limited its ability to grow for the next year until it gets its act totally together, and then in an almost unprecedented move, demanded that 25% of the board be replaced this year.  In a reaction to the decision during the stock market selloff, Wells lost over 9% of its value taking a $29 billion beating on its valuation, pushing it significantly behind its competitors.

Will Wells and its kind finally get the message?  It’s hard to say since we’ve seen nothing but more evidence of predation from them even as their bully-boy practices have been exposed repeatedly.

If patience is running out at the Federal Reserve and on Wall Street, maybe they will finally understand why we chanted in front of their Los Angeles headquarters years ago, “Predatory Lender, Criminal Offender!”

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