Building Shared Prosperity from The Ground Up:

Consumer Protections as the FoundationFighting Poverty Summit

Shared Prosperity Philadelphia11.30.17

Kerry SmithSenior Staff Attorney

Homeownership and Consumer Rights UnitCommunity Legal Services

1424 Chestnut StreetPhiladelphia, PA 19102

215‐981‐3724ksmith@clsphila.org

Consumer Protection: A Foundation for Financial Security

Financial Education

Safe and AffordableProducts

Income & Wealth Building 

Opportunities

PROTECTGains made by eliminating predatory practices

Graphic from Center for Responsible Lending

Student Loan Debt

Student Loan Debt

Student Loan Delinquency Rates by ZIP Code

www.mappingstudentdebt.org

Student Loan Debt

1%

16%

7%

18%

35%

18%

3%

1% 1%

CLS Student Loan Borrower Clients by Age Range

Teen20s30s40s50s60s70s80s90s

Student Loan Debt

Challenges:Federal Loans:   CLS‐eligible, low‐income borrowers almost always will qualify for an income‐sensitive payment that is or is near $0

Problem:  loan servicers have a disincentive to enroll borrowers into these plans; and failure to do so can cause significant financial harm

Student Loan Debt

Challenges:Private Loans:  no mandated affordable repayment plans; collection through traditional means, and bankruptcy discharge is generally not available unless “undue hardship”Abusive For‐Profit Schools: “defense to repayment” rules in limbo

CFPB: Student Loan Watchdog

• Student Loan Ombudsman• $19.1 million to be paid by a private student loan collector for improperly suing borrowers

• Suing the largest student loan servicer to ensure borrowers get affordable payment plans

• PA Attorney General’s new Consumer Financial Protection Unit: our next watchdog?

Abusive Debt Collection Litigation

Consumers are facing an explosion of predatory debt collection lawsuits.

Dirty Debts Sold Dirt Cheap*Debt Buyers Unfair Practices:

– Filing claims with defective, inaccurate or insufficient proof of the debt.

– Robo‐signing.– Collecting on time‐barred debt.

*Dalié Jiménez, Harvard Journal on Legislation, Vol. 52 (Winter 2014).

Abusive Debt Collection Litigation

How to collect Dirty Debts Sold Dirt Cheap:Use the courts!

“Do not be intimidated by the Court House.  The Small Claims Court is actually going to help you make money.  It is the vehicle that flushes out payment.”

Larry K. Neil, The Complete Guide to Buying Debt (2013), available at www.beadebtcollector.com.

Abusive Debt Collection LitigationCompounding the Problem:• Limited access to representation.

• “Rubber Stamp Justice” Human Rights Watch callsout Philadelphia’s judgelesscourtrooms

Abusive Debt Collection Litigation• CFPB sues to stop debt collection litigation abuses

• AG and the DA could continue to take action

• Court reforms

Threat: Predatory Payday Loans

Laws Under Attack

Payday loans: Debt‐Trap By DesignTraditional Balloon Payment Payday Loans:

Very high fees (300 to 400% APR)

Single balloon payment of principal and interest

Over a very short term (typically two weeks)

Secured by access to the bank account

No underwriting of ability to repay without re-borrowing

Payday loans: Debt‐Trap By Design

Payday loans: Debt‐Trap By DesignLong-Term Payday Loans: Debt Trap on Steroids

Threat: Predatory Payday Loans

Payday loans cause financial distress:

• Fall behind on other bills• Delay medical care• Overdraft and lose bank accounts• Bankruptcy• Impair military readiness

Threat: Predatory Payday Loans

Diverse Coalition Fought Back:• Saved $233 million in excessive fees and interest charges annually

• Stopped 1,000 payday loan storefronts from flooding into Pennsylvania

Federal Threat to State Protections

S. 1642 and H.R. 3299:  “Madden” Bills Could Open Floodgates to Predatory Lenders:– Threatens state interest rate caps.

– Would make it easier for payday lenders and other non‐banks to use rent‐a‐bank scheme to evade state interest rate caps

Attacks on the CFPB Payday Rule

Congressional Review Act:• Gives Congress, with the President’s signature, a window to veto a rule from going into effect.

• Special provisions to expedite a vote and prevent a filibuster. 

• If a rule is blocked by a CRA vote, the agency is forever barred from doing a substantially similar rule unless Congress authorizes it.

Threat: Predatory Payday Loans

Action Steps:–Join the coalition www.stoppaydayloanspa.com

–Contact State Legislators and PA Congressional Delegation

–Letters to the Editor; Op‐Eds–Engage community groups and leaders

For more informationKerry Smith

Senior Staff AttorneyHomeownership and Consumer Rights Unit

Community Legal Services1424 Chestnut StreetPhiladelphia, PA 19102

215‐981‐3724ksmith@clsphila.org

Opportunities to Build Power Through Consumer Protection

The key to adequately protecting consumers is to

empower them to be in control of the marketplace.

CFPB by the numbers:

• $12 billion returned to 29 million consumers• 1,242,800 complaints have been handled by CFPB as of July 1, 2017

• 40+: Cities where CFPB has held public town halls or field hearings

• 60+: New consumer safeguards• 97%: Complaints resolved within 15 days

Key Enforcement Actions:• 05/12/15 Sprint & Verizon: Unauthorized charges on customers’ cell phone bills.

• 09/08/16 Wells Fargo: Secretly opening unauthorized deposit and credit card accounts.

• 10/11/16 Navy Federal Credit Union: Made false threats about debt collection to its members, and restricted account access when members had a delinquent loan.

• 01/03/17 Transunion & Equifax: Deceived consumers about actual costs, and lured customers into costly recurring payments.

• 01/18/17 Navient Corporation: Illegally failing to provide borrowers with flexible repayment plans.

• 04/20/17 Ocwen Financial: Failed borrowers throughout the entirety of their mortgage servicing process.

The financial industry is spending roughly $2 million per day

lobbying Congress to deregulate Wall Street.

WHY IS THE CFPB CONSTANTLY UNDER ATTACK?

Consumers have strength in numbers.

Each has a stake…

• Seniors• Veterans• Students• Low‐income families• Single mothers• Single fathers• Women• Unemployed• Underemployed• Immigrants• Underbanked• Millenials• Gen Z

• Servicemembers• Consumers with disabilities• Community Associations• Community Development Organizations• Faith communities• Communities of color• Consumers without a high school diploma• Middle class families• Working class families• And on…• …an on…

THE POWER OF OUTREACH

THE POWER OF STORYTELLING

THE POWER OF COALITIONS

Change rests on our ability to build

collective power.

FINANCIAL JUSTICE AND COMMUNITY EQUITY:

An affirmative agenda for New York.Andy Morrison, Campaigns Director

New Economy Project’s mission is to build a new economy that works for all, based on principles of cooperation, democracy, equity, racial justice, and ecological sustainability.

We work with community groups to achieve this mission by: (1) challenging corporations that harm communities and perpetuate

inequality and poverty; and (2) building strong local economies, by fostering democratically-structured,

community-controlled initiatives such as worker cooperatives, community development credit unions, community land trusts, and mutual housing.

We believe a world is possible in which all people live in safe, healthy, thriving communities, and that fundamental change is needed to achieve that world.

TWO‐TIERED FINANCIAL SYSTEM

PREDATORY LOAN SHARKS ARE CIRCLING

THE BEST DEFENSE IS A GOOD OFFENSE1. Build individual and community 

wealth.2. Hold banks accountable to New 

Yorkers and New York communities.

3. Preserve and enhance our state’s strong usury and other consumer protection laws, and keep payday and other predatory, high‐cost lending out of New York.

A CDCU is a credit union with a mission of serving low‐ and 

moderate‐income people and communities. CDCUs specialize in serving populations with limited access to safe financial services.

“WE ENVISION A COMMUNITY DEVELOPMENT CREDIT UNION IN EVERY NEIGHBORHOOD.”

2015 FDIC National Survey of Unbanked and Underbanked HouseholdsHow interested are banks in serving households like yours? for New 

York, 2015 by Selected Household Characteristics

BANKS MUST BE HELD ACCOUNTABLE.

WE NEED A NEW ECONOMY.

THANK YOU!

Andy Morrison212‐680‐5100

andy@neweconomynyc.org