June 29, 2018

This toolkit guides you through the process of creating rules of thumb—simple, actionable messages that can guide consumers on a decision or action. This toolkit is for financial services providers and community organizations interested in: solving a consumer financial challenge, designing rules of thumb and measuring their impact on consumers, and learning a consumer-centric design approach. 

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- CommonWealth

In late April, the Consumer Financial Protection Bureau announced its intent to end public access to the Bureau's complaint database. Following the announcement, stakeholders, such as financial services companies, consumer advocacy groups, and concerned citizens, were invited to submit comments to the Bureau regarding the proposed change. The Network submitted the following comment, which will also published in the Federal Register upon review. All comments are available to read here.

"The Consumer Financial Protection Bureau’s public complaint database is an invaluable resource for Hoosier consumers. Members of the Indiana Assets & Opportunity Network have used the database in a variety of ways in their work to promote public policies that allow low-wealth Hoosiers to build assets. We ask that the CFPB continue to offer this important tool for consumers, researchers, and policymakers, and commit to keeping the data publicly available.

Collectively, we have referred a number of individuals and organizations to the complaint database to seek redress. One Hoosier was made aware of a pending lawsuit against the tribal lender she was struggling to pay back through the complaint process, while others have reported that filing a complaint with the database secured a more prompt and satisfactory response than their individual efforts garnered. Over 16,000 Hoosiers have submitted complaints to the CFPB on issues ranging from debt collection tactics to student loan servicing problems.

We have also used the data to inform our publications and policy priorities. In an upcoming policy brief on debt collection, the ability to sort complaints by type revealed that many Hoosiers have complained about collection attempts for debts they feel they do not owe and tactics they find inappropriate. This enabled our researcher to focus policy recommendations on the areas of greatest concern. In the aggregate, complaints provide compelling information about the policy and program areas that could benefit from further attention.

A public database connected to a regulatory body leads to greater accountability and swifter resolution of consumer concerns. Private ratings websites, while meaningful, are not backboned by an agency that can seek out patterns of practice or go after bad actors. Further, they have no commitment to maintain operations; they could be here today and gone tomorrow. Maintaining this particular database is important to lending weight to consumer feedback and resolving problems quickly.

Again, the Indiana Assets & Opportunity Network respectfully requests that the CFPB keep this powerful consumer tool and the data it produces accessible."

The Consumer Financial Protection Bureau joined two payday lender associations — the Consumer Financial Service Association of America and the Consumer Service Alliance of Texas — in a motion to push pause on pending litigation to block implementation of the CFPB’s payday rule. In the same motion, they sought a delay of the rule’s compliance date of August 19, 2019.

The payday rule requires lenders to either assess a borrower’s ability to repay a loan and still meet his or her other financial obligations or, if they choose to forgo the ability-to-repay assessment, to limit the number of loans per borrower to six in a twelve-month period. It was developed after five years of study and public comment.  

“To say we’re disappointed is an understatement,” said Kathleen Lara, Policy Director for Prosperity Indiana. “Hoosiers overwhelmingly support payday lending reform. If the Consumer Financial Protection Bureau will not implement common sense consumer protections, our state lawmakers must take action. Fifteen states now protect their citizens from predatory lending by capping payday loans at 36% APR or less, and the federal government extends this protection to all active duty military personnel. This should be a top priority for Indiana lawmakers next session.”

Wednesday was a victorious day for consumer advocates across the country. It marked the last day for lawmakers to act to repeal the Consumer Financial Protection Bureau’s payday rule, and the deadline passed without Congress voting to repeal the rule. The rule requires payday and car title lenders to either assess a borrower’s ability to repay before issuing a loan, or issue a limited number of loans without assessing a borrower’s ability to repay.

Resolutions to repeal the rule were introduced in both the House and Senate, but failed to garner sufficient support. Among the Indiana delegation, only representatives Messer, Banks, and Hollingsworth signaled support for repeal by cosponsoring the resolution. Lawmakers sought to repeal the rule using the Congressional Review Act. (The CRA is a fast-track legislative tool that allows lawmakers to undo federal regulations with a simple majority vote in both the House and Senate. If invoked, the CRA prohibits the federal agency that issued the rule from rolling out regulations substantially the same as those it reversed.) The Congressional Review Act allows lawmakers 60 legislative days to act from the day a rule is published in the Federal Register. Since neither chamber brought the payday rule resolutions to a vote during the limited time allotted for a CRA challenge, the payday rule was not overturned.

“In a January 2018 poll, 75% of Hoosiers opposed a payday loan store opening in their community. That’s because they know the destabilizing impacts of this business model on consumers and neighborhoods, such as increased debt and greater likelihood of losing one’s bank account due to overdraft and insufficient funds fees,” said Kathleen Lara, Policy Director at Prosperity Indiana.

Although Wednesday was a celebratory day for consumer advocates, the payday rule remains in jeopardy.  Acting CFPB Director Mick Mulvaney has frozen the deadline for compliance with the rule as the bureau considers ways to amend and, likely, weaken, it through a public comment period. The Community Financial Services Association of America, a group that represents the payday lending industry, is also suing the bureau over the rule, and it’s possible that the bureau could choose not to defend itself in the case.

“We are grateful that members of Congress decided to let the payday rule stand. But it is clear that there is still work to be done: we must convince Acting CFPB Director Mulvaney to do the same, and continue to work toward a rate cap to bring down the cost of credit for Hoosiers—something the CFPB was not permitted to do,” said Erin Macey, policy analyst at Indiana Institute for Working Families.

Unlike 15 other states and D.C., Indiana permits high-cost payday loans. While in-state advocacy groups and working people have been pushing for state representatives to pass a 36%-or-lower cap on interest rates for payday loans, none exists to date—making the CFPB rule critical in protecting Hoosiers who may utilize these products. Advocates for the 36 percent APR cap will seek legislation at the state level again next year.

According to a new report from the Wall Street Journal, Mick Mulvaney, acting Director for the Consumer Financial Protection Bureau, announced his intent to end public access to the Bureau's complaint database. Consumers use the database to file complaints against financial companies, and the CFPB publishes these complaints for public use. The company has the option to publish a public-facing response to a consumer's complaint. 

Although Mulvaney intends to end public access to the database, he said the Bureau would continue to maintain a toll-free number and a website to gather consumer complaints and forward them to companies. "I don't see anything in here that says I have to run a Yelp for financial services sponsored by the federal government," Mulvaney said. 

The announcement comes as the CFPB is engaging in a series of public comment periods on a dozen issues to "ensure the Bureau is fulfilling its proper and appropriate functions." The twelfth and final in the series relates to the Bureau's handling of consumer complaints, including whether the Bureau should change how it operates the website. 

Many consumer advocates have expressed disappointment in Mr. Mulvaney's announcement. Aaron Klein, fellow in Economic Studies and policy director of the Center on Regulation and Markets at the Brookings Institute, tweeted: "Thanks to @CFPB complaint database, people are more informed when they make choices, and businesses have greater reputational incentives, which promotes a more efficient and effective market. Eliminating #CFPB database is an attack on free markets." Researchers and consumer advocates also use the database to better understand what consumer issues are most problematic. (The top three most common complaints are about mortgages, debt collection, and credit reporting.) 

Since the Bureau started accepting complaints in July 2011, they have received 1.5 million consumer complaints, approximately 16,500 of which have come from Indiana.

In the Statehouse, the House narrowly passed HB 1319 to allow payday lenders to offer installment loans at up to 222 percent APR. This bill will be heard March 1st in theSenate Commerce and Technology Committee. We anticipate that the Senate will change the bill in some way to bring the APR down, but that it will still exceed Indiana's criminal loansharking cap of 72 percent APR and will allow lenders to secure access to borrowers' bank accounts, creating a disincentive for lenders to assess a borrower's ability to repay the loan and still meet other financial obligations. There has been talk of amending the bill to look more like the small loans law in Colorado, but a recently-released report indicates thatColorado's reforms are still trapping borrowers in high-cost loans with substantial default rates. Advocates in Colorado are currently seeking a rate cap of 36 percent on small loans.

Lawmakers in the Senate—including President Long—have mentioned the attention given to the issue and the calls from their districts to vote no on the bill. This had led several to commit to voting no, even on an amended bill. Please keep the pressure on, reminding them that Indiana already allows small installment loans that can reach 71 percent APR. We don't need to loosen this law any further. Letters to the editor and local news stories about better alternatives are also helpful. 

Late last year, a bipartisan group of lawmakers introduceda joint resolution under the Congressional Review Act to override the Consumer Financial Protection Bureau’s (CFPB) federal payday rule. Since its introduction, Rep. Hollingsworth [IN-09], Rep. Banks [IN-03], and Rep. Messer [IN-06] have co-sponsored the bill.

Just last week, Senator Lindsey Graham (R-SC) introduced a bill in the Senate that would, likewise, nullify protections for payday loan borrowers by repealing the rule. The rule requires payday and car title lenders to assess a borrower’s ability to repay before issuing a loan or issue a limited number of loans without assessing a borrower’s ability to repay. This is a common sense measure that is designed to protect people from being trapped in the high-cost loans that characterize the payday and car title industries.

The rule, which was finalized last year and is set to go into effect in August of 2019, already appears to be in jeopardy in the hands of CFPB Acting Director Mick Mulvaney, who announced that the Bureau would reconsider the protections. 

Polling data shows that 78% of Hoosiers support an ability to repay requirement and earlier this year, at the request of advocates, the Indiana Senate rejected a measure to expand payday lending in Indiana. Congress has until early May to overturn the Payday Rule.

There are a number of ways you can support common sense payday loan reform, including:

• Calling Senators Donnelly(202-224-4814) and Young(202-224-5623) to remind them that 78% of Hoosiers support an ability to repay requirement and that Hoosiers can't afford high-cost debt traps (if borrowers can afford to repay loans, then, lenders have no reason to oppose the Payday Rule);

• Joining the Network Thurs., Apr 19 6:30-8:00 PM for a film screening and panel discussion on payday lending and local reform strategies; and

For nearly everything we consume, we rely on regulatory agencies to tell us what's safe and what's not. These regulations serve our needs and interests as consumers. Yet the past weeks have been rife with attempts to chip away at consumer protections on both the federal- and state-level. This is the continuation of a worrisome trend to end safeguards for vulnerable consumers.

At the federal-level, there has been action to fundamentally reform the Consumer Financial Protection Bureau, following the resignation of former Director and Obama-era appointee Richard Cordray and the appointment of the Bureau's(contested) Acting Director, Mick Mulvaney (here's a tally of what actions the Bureau undertook since Mulvaney's appointment.) Most notably, the Bureau announced it would engage in a rule-making process to reconsider its Payday Rule, which requires payday, auto-title, and certain high-cost installment lenders to determine a borrower's ability to repay before issuing a loan. The announcement comes after the Bureau added language to its description of responsibilities, including "identifying and addressing outdated, unnecessary, or unduly burdensome regulations."

At the state-level, lawmakers are entertaining two bills—HB 1319 andSB 416—that would create predatory lending products with triple-digit APR. HB 1319, which passed the House Insurance and Financial Institutions Committee on January 24, would authorize a new, longer-term installment loan product from payday lenders that would carry interest rates up to 222% APR. Indiana currently defines felony criminal loan sharking at 72% APR; however, HB 1319 exempts finance charges from the APR calculations, effectively, legalizing criminal loan sharking in the state. 

At the hearing, veterans' coalitions, faith communities, and charitable and community groups testified in opposition to the bill. "The bill before you is not reform . . . It is a request for extreme loosening of Indiana's current installment loans that reach 71% APR. 72% APR is criminal loan sharking. What you are here today to decide is whether or not to legalize what is currently considered to be felony loan sharking," Erin Macey, IIWF Policy Analyst and Network leader, testified before the committee.

SB 416, which is expected to be assigned to a summer study committee, would allow banks, credit unions, and non-traditional lenders to skirt the criminal loan sharking statute and raise interest and fees on many types of consumer credit products. SB 325, a bill pioneered by Network co-lead organizations Prosperity Indiana and Indiana Institute for Working Families, caps APR at 36%—the rate the U.S. Department of Defense secured to protect active duty military members; as have 15 other states to protect borrowers from usurious loans.

It's been a tumultuous couple of months for tax bill writers and constituents alike. As lawmakers hurriedly drafted legislation behind closed doors, many Americans were biting their nails at the predicted impact the bill would have on their livelihoods, includingpossible tax hikes over the life of the Senate’s bill andcuts to vital public benefits programs in both House and Senate versions of the bill.

After passing their respective tax bills, which analyses demonstrate constitutes the greatest transfer of wealth from the working- and middle-classes to the wealthy in the nation's history, the House and Senate needed to reconcile their bills’ differences in a conference committee.The conference committee reconciled many issues, including the tax rate of "pass-throughs", individual tax rates, the child tax credit, the mortgage interest deduction, the medical expense deduction, the education deduction, the estate tax, and Obamacare's individual mandate. A majority of House and Senate conferees signed off on the reconciled bill Fri., Dec. 15. 

The conference committee’s negotiations resulted in some improvements to earlier versions of the bill—the medical expense deduction, the student loan interest deduction, and the deduction for educators' classroom expenses were preserved in the final bill, for example. However, the final bill, at its core, remains deeply problematic because it explodes the federal deficit and justifies that explosion by cutting vital services that millions of Americans rely on. Seventy (70) percent of Americans will utilize a program like Medicaid or the Supplemental Nutrition Assistance Program (SNAP) at some point in their lives, underscoring the fiscal and moral recklessness of this bill. 

The tax bill will have repercussions on working- and middle-class Americans for decades to come. It's all hands on deck to resist further attempts to exacerbate wealth inequality.

You have probably signed one. Not too long ago, I signed one while securing a car loan. "I don't want to sign this," I said, when I saw the page titled "arbitration clause" laid down in front of me. "Is this negotiable?" "No," the loan officer responded, before assuring me that it would just make any disputes quicker and easier to resolve. 

Quicker and easier for whom? Arbitration clauses have been slipped into the contracts for many financial products and services—credit cards, payday loans, even the recent Equifax credit monitoring service offered in the wake of the data breach—and these clauses limit consumers' options for addressing legal issues with their providers by requiring that the matter be addressed with a private arbitrator rather than in the courts. Meanwhile, a report from the PEW Charitable Trusts demonstrates consumers' belief in fair reconciliation of consumer disputes. They found that 95 percent of consumers said they should have the right to have their cases decided by a judge or jury while 89 percent supported consumers' right to participate in group lawsuits. Group lawsuits are important as many individuals will not pursue relief on their own, especially when the harms are small yet often repeated many times over. Arbitration clauses are also tucked intoemployment agreements, making it more difficult to bring discrimination or wage and hour cases forward.

The Consumer Financial Protection Bureau recentlyissued a rule to ban mandatory arbitration clauses for financial services. Opponents of the rule argue that consumers receive greater relief in arbitration, winning on average $5,389 as opposed to an average of $32 in class action lawsuits. However, these statistics ignore the reality that only consumers with significant damages pursue relief through arbitration and very few win. According to aCFPB study, millions of consumers obtain relief through class action lawsuits each year while many fewer (some reports estimate as few as 20 people annually) receive relief in arbitration.

The House has already voted to roll back the CFPB's rule (see how your lawmaker votedhere), and the Senate may vote to do the same early next week. If you believe, as I do (and many others, includingthese 400+ college professors) that class action is an important tool to deter financial institutions from mistreating consumers and to provide relief when they cause harm, please let Senators Donnelly and Young know they should vote "no" on S.J. Res 47. Capitol switchboard: (202) 224-3121.