The movement for consumer justice has gotten bigger and stronger, and if you’re in Chicago next week you can experience it firsthand. Americans for Financial Reform (AFR), a big coalition of which AFFIL is a member, is organizing a series of demonstrations on October 25 – 27. Over 5,000 people are expected to attend.
And that’s not all Americans for Financial Reform (AFR) is up to. This mega-coalition was formed a few months ago to take advantage of the current opportunity to reform the nation’s financial regulatory system. Keep reading
Private student loans are more expensive, riskier, and come with fewer borrower protections than federal student loans. Nevertheless, almost two-thirds of the undergraduates who took out private student loans during the 2007-2008 school year did so without first obtaining the maximum federal loans for which they were qualified. In fact, over a quarter of students who took out private student loans took out no federal loans at all. This is the most dramatic single finding highlighted in “Private Loans: Facts and Trends,” a report released last week by the Project on Student Debt.
And we’re not talking about just a few students here. The U.S. Department of Education survey on which the report is based is done every four years. Between the 2003-04 survey and that for 2007-08, the share of all undergraduates who had private loans rose from 5% to 14%, while the actual number of private loan borrowers more than tripled, from less than one million to nearly three million (2,946,000) students.
In recent years, the Office of the Comptroller of the Currency (OCC)– the main federal regulator of the nation’s biggest banks – has seemed concerned with consumer protection only when it was acting aggressively to protect “its” banks from the prospect of being sued by state attorneys general for their predatory practices. The OCC pursued this anti-consumer agenda so aggressively that even conservative Justice Antonin Scalia, in a blistering Supreme Court opinion issued earlier this week, felt compelled to denounce their over-reaching.
In a little-noticed speech (pdf) on July 8, however, Comptroller John Dugan – perhaps trying to repair his agency’s tattered reputation – came across as a born-again consumer protector.
Earlier this week, President Obama announced his plan to create a Consumer Financial Protection Agency as part of his financial reform package. It is a great idea, and I hope it will succeed.
If you buy a sports car, you are not likely to accept a station wagon when you go to pick up your new car. But that happens all the time with financial products, because most consumers would not know the difference between the paperwork for a teaser-rate mortgage with a balloon payment and the paperwork for a clean, 30-year fixed mortgage. The market does not work when good products are indistinguishable from bad ones. The CFPA will be able to do so.
Further, while Congress and state governments can create laws to regulate financial products, they are a cumbersome regulator, often ineffective for addressing a nimble, frequently-changing financial marketplace. The CFPA will be able to move quickly to address emerging financial products.
This is a great week for AFFIL because our friend Denise Richardson devoted an entire column to us at the Florida Sun Sentinel. (Thanks again Denise!) You can see her column here.
Coincidentally, a while back Sam asked me to write a “what AFFIL is up to” blog post, and lucky for me, Denise has now done some of the work for me. Here’s an excerpt of what she has to say:
This weekend I got embroiled in a discussion with someone who insisted that government regulation caused the economic meltdown. This person is not alone in believing that regulation is always a bad thing, and can only cause harm.
At some point I realized that this was a silly debate to be having, sort of like whether or not there should be traffic laws. Promoting sensible traffic laws does not make a person “anti-traffic.” Yet somehow promoting sensible market laws is seen as being anti-market.
Good regulations and laws sustain the market, rather than thwart it. Not all regulations are good. But we should be debating what types of regulations are good and sensible, not whether regulation should exist at all.
Always one of the most eloquent proponents of re-regulation, Elizabeth Warren made another public appearance last week to explain why we need it. (Skip ahead in the video above to the last few minutes to get to the good part.)
The word from AFFIL’s Partners in Washington is that the Senate will vote on Thursday on judicial loan modifications. Lifting the ban on these court-supervised modifications would save 1.7 million homes and $300 billion in home equity for neighbors of families facing foreclosure. (For background info on judicial loan mods, see this previous post by Sam, or this one on the AFFIL blog.)
Even though this measure would be incredibly helpful and effective in fighting foreclosures, it’s not certain that 60 Senators will vote for it. (It’s already been approved by the House.) Without 60 votes to get around a filibuster, the measure won’t pass.
You can use this link to contact your Senators and make sure they support judicial loan modifications.
Senator Durbin’s office put together this useful table showing how many homes and how much home equity would be saved in each state by lifting the ban. Even the numbers at the state level are huge – for example, 25,000 homes could be saved in Minnesota, 43,000 in Ohio, and a whopping 206,000 in Florida.
When you contact your Senators, make sure they know just how many homes a “no” vote on Thursday will cost your state. Keep reading
Last week, the House Subcommittee on Financial Institutions and Consumer Credit held a hearing on H.R. 1214, the Payday Loan Reform Act. AFFIL and our Partners are calling this the “Payday Lender Protection Act.” It’s the first bill that AFFIL has ever officially opposed (PDF link). Unfortunately, the bill enjoys a lot of support and the full House could vote on it soon after they return from recess.
H.R. 1214 would allow payday lenders to charge $15 per $100 borrowed – which for a two week loan amounts to an annual percentage rate of 391%. Over 80% of AFFIL members and 48% of the general public think 36% interest is too high, let alone 391%. Of course, a 36% cap is the best we can hope for, and would be a big improvement over the status quo. (See this post about Senator Durbin’s “Protecting Consumers from Unreasonable Credit Rates Act” for more info.) Keep reading
It’s tough to follow up on a post about how to make a Black and Tan, but I’ll give it a try. I was inspired to write by an interesting discussion over at the Consumerist about credit card rate hikes and credit line cuts. Many AFFIL members have written to us about this phenomenon, and we’ve also spoken with industry insiders who confirm that the issuers are cutting limits and raising rates even on long-standing good customers. (The Consumerist discussion got started because of this article in the New Yorker.)
Consumers with some financial cushion can probably wiggle around these credit card changes and come out unscathed. If their rate goes up they can pay off the card in full; decline the new terms, stop making new charges, and pay off the existing balance at the old rate; or transfer the balance to a different card.
But there are plenty of consumers who are, in the New Yorker’s words, “captive customers.”