NCLR Welcomes Proposed CFPB Regulations that Would End Debt Traps

Photo: Dan Iggers

Photo: Dan Iggers

Consumers trapped in a cycle of debt got welcome news today as the Consumer Financial Protection Bureau (CFPB) announced new protections for payday loans, vehicle title loans, deposit advance products, and certain high-cost installment loans. The CFPB held a public hearing in Richmond, Va., to announce proposed rules that would end payday lending debt traps by requiring lenders to take steps to make sure consumers can repay these loans. The proposals under consideration would also restrict lenders from attempting to collect payment from consumers’ bank accounts.

NCLR supports strong protections for consumers when using financial products and services. In the case of the payday marketplace, this is not a small segment of consumers: research shows that 12 million Americans take out a payday loan each year. Of these consumers, four out of five are not able to pay it back within the original loan term, suggesting that the loan may not be affordable for the majority of consumers who use them.

While there is a definite need for small-dollar credit and loans, especially for low-income consumers and those who may be outside the financial mainstream, consumers should not end up in financial ruin as a result of taking out a loan. Unfortunately, research has shown that payday loan borrowers have been found to be indebted for more than half of the year as a result of taking out a payday loan.

NCLR supports a strong payday rule that will:

  • End the debt trap. An affordable loan should not need to roll over multiple times to pay off the original loan.
  • Have a strong ability-to-repay provision. Underwriting should take the borrower’s monthly expenses and obligations into consideration.
  • Establish a maximum length a borrower can be in debt, such as 90 days in a 12-month period.

CFPB_LogoThe CFPB’s proposal recognizes that a crucial principle—ability to repay—must apply to a sufficiently broad range of small-dollar loans, not just to a narrowly defined set of payday or car- title loans. At the same time, however, parts of the CFPB’s proposal provide exceptions that could still result in harm to consumers. These “debt trap protection options” would permit payday lenders to continue making both short- and longer-term loans without determining the borrower’s ability to repay. Such exceptions would fail to end the debt trap business model that many in the industry use to make a profit.

This proposal is a huge step forward in the right direction—providing much-needed protections for products that have gone unregulated for far too long—and NCLR looks forward to working with the CFPB to improve this proposal so that all consumers who use small-dollar loans are protected from predatory practices.

Cutting Vital Tax Credits for Working Families Will Put Our Nation’s Children at Risk

By Janet Murguía, President and CEO, NCLR

ACAdiabetesblog_pic1_resizedBy any measure, the Earned Income Tax Credit (EITC), created by President Gerald Ford, has been a resounding bipartisan success. President Ronald Reagan, who substantially expanded the credit during his administration, called it “the best antipoverty, the best pro-family, the best job creation measure ever to come out of Congress.” The equally successful and bipartisan Child Tax Credit (CTC) was enacted during the Clinton administration and increased under President George W. Bush.

As a nonpartisan organization, NCLR has worked with all of these administrations, as well as with Congress, on both the EITC and the CTC. These tax credits have helped lift millions of families out of poverty and have had a measurable impact on the poverty rate in this country. So why, then, are some Republican members of Congress pushing for proposals to scale back the EITC and significantly reduce the number of families eligible for the CTC?

One answer is that they think these cuts will only affect immigrants, since they are proposing to exclude recipients of immigration relief, such as Deferred Action for Childhood Arrivals (DACA) and Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA), from receiving the credits. Some lawmakers might even believe that this is “good politics.” But they are very wrong, both on the substance and on the politics. The greatest beneficiaries of these tax credits are children—American children. More than 90 percent of the children who would be affected by these proposals are native-born U.S. citizens.

Cutting credits to these kids is fiscally unsound. Eliminating them would cost the average family about $1,800, yet studies show that an increase of just $1,000 in family income raises a child’s math score by 2 percent and reading score by 3.5 percent. Common sense dictates that removing this source of income would have an equally dramatic negative impact.

Putting these children’s educational achievement and their family’s financial stability at risk doesn’t just shortchange the kids—it shortchanges the future of everyone in this country. One in every four children is Latino. The average age of U.S.-born Hispanics is 18. These kids are our future workers and the future contributors to Social Security, Medicare, and the rest of the country’s safety net. We should be investing in these young children, not punishing them.

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This is what makes these proposals also morally bankrupt, an ironic twist given the professed pro-family, pro-faith, and pro-traditional values of the Republican Party. No matter how one feels about immigration policy, it is simply wrong to punish children for their parents’ deeds, as the Bible notes in Deuteronomy (24:16) and again in Ezekiel (18:20). DACA participants—the so-called DREAMers—were brought to this country as children. Those eligible for DAPA are, by definition, parents of U.S.-citizen or legal resident children. Has our political culture become so ugly that we would go out of our way to impose harsh measures on children raised in this country for simply being born into the “wrong” type of family, as some proponents of these cruel proposals assert?

I hope not. But if it has, the lessons will be memorable. A major strength of the Republican Party has been consistent fidelity to key maxims: low taxes, hard work, family values, and reverence for Judeo-Christian traditions. If its leaders allow devastating tax increases aimed squarely at Hispanic American children simply to score political points, they do so in knowing violation of their core values.

We will remember that the party’s principles were betrayed by the hypocrisy of some of its members. The Latino community will remember that the interests of more than four million of its children were sacrificed so a few politicians could pander to extremists. We hope candidates remember this episode in 2016, when they experience a record turnout of Hispanic voters.

How to Prevent Diabetes: A Twitter Chat

March 24 was Diabetes Alert Day this year. To mark the ocassion, NCLR joined the American Medical Association, the YMCA, the National Council on Aging, and the National Association of City and County Health Officials for a twitter chat on what people can do to fight against diabetes.

Living the American Dream: Karina Velasco

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By Janet Hernandez, Senior Civic Engagement Project Manager, NCLR

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Karina outside the U.S. Capitol during the recent National Latino Advocacy Days.

The most recent snow storm to hit the Washington, DC, area could not stop Karina Velasco, a 25-year-old DACA recipient, from meeting with her congressional representatives and advocating for administrative relief. Since congressional offices were closed during National Latino Advocacy Days, Karina rescheduled her meetings to ensure Congress heard her story.

Her persistence comes from years of advocating for an opportunity to experience the American dream. Throughout her life Karina witnessed her parents’ struggle, perseverance, and hard work. Her mother cleaned restaurants and houses while also being a full-time mother. Her father held two jobs in construction and housekeeping to make ends meet. Their encouragement and daily sacrifices helped Karina make the choice to focus on her education.

“My mother always told me that education was the path to success, so I decided to become a social worker to advocate for those in need,” said Karina.

In 2012 she celebrated the president’s Deferred Action for Childhood Arrivals (DACA) announcement, and gathered the paperwork needed to apply. She also helped fill out hundreds of applications for other DREAMers who were eligible to apply for DACA. Since Karina received DACA, she has obtained a driver’s license, finished community college, transferred to a four-year university, and obtained a job. Having the job allows her to enter the workforce, pay taxes, and help others.

“Without DACA it would have been harder to accomplish this success. I can finally contribute to my country’s economy and lift some of my parents’ economic burdens,” said Karina.

This week, Karina met with her elected officials to highlight how well DACA works by demonstrating that she is an example of the program’s success.

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Karina (left), Representative Chris Van Hollen (D-Md.), and Rosa, program manager for NCLR Affiliate Latin American Youth Center

Like Karina, there are millions of other young Americans who need Congress to stand up for administrative relief rather than deny them the opportunity to contribute to the country and pursue the American dream.

Know Your Risk for Type-2 Diabetes

Currently, diabetes affects nearly 29 million people. Another 86 million have prediabetes and are at risk of developing diabetes, but only about 9 million are aware of it. You may not be at risk, but what about the people you love?

On this Diabetes Alert Day, we want you to take the steps needed to fight back against diabetes in our communities. Take the Diabetes Risk Test today!