NCLC Advocates Applaud 36% National Rate Cap Bill to Curb High-Cost, Predatory Loans Across the Nation - National ...

​NCLC ​Advocates Applaud 36% National Rate
 Cap Bill to Curb High-Cost, Predatory Loans
 Across the Nation

FOR IMMEDIATE RELEASE: July 29, 2021
National Consumer Law Center contact: Jan Kruse (jkruse@nclc.org)

Washington, D.C. – Attorneys at the National Consumer Law Center praised the introduction
yesterday of the Veterans and Consumers Fair Credit Act in the U.S. Senate, led by U.S. Senators
Jack Reed (D-RI), Jeff Merkley (D-OR), Sherrod Brown (D-OH), and Chris Van Hollen (D-MD), along
with seven other original co-sponsors.

“Interest rate limits are the simplest, most effective way to stop predatory lending and to ensure that
lenders make responsible loans that people can afford to repay without getting caught in a debt
trap,” said National Consumer Law Center Associate Director Lauren Saunders. “A national
36% interest rate cap that covers all lenders, including banks, and all borrowers, including veterans
and other consumers, will prevent predatory lenders from evading state interest rate limits and give
everyone the same protections that our active military families already enjoy. The 36% interest rate
limit is the broadly accepted dividing line between responsible lending and destructive credit that
harms lives and destroys financial inclusion.”

The Veterans and Consumers Fair Credit Act would eliminate high-cost, predatory payday loans,
auto-title loans, and similar forms of toxic credit across the nation by:

      Establishing a simple, common sense limit that is broadly supported by the public on a
      bipartisan basis.
      Preventing hidden fees and loopholes.
      Simplifying compliance by adopting a standard that lenders already understand and use.
      Upholding the ability of states to adopt stronger protections as needed, such as lower rates for
      larger loans.

The Veterans and Consumers Fair Credit Act extends the federal Military Lending Act’s (MLA) 36%
interest rate cap on consumer loans to all Americans, including veterans and Gold Star Families

Polling data show that voters across the political spectrum strongly support interest rate limits.
Many states already have a reasonable rate cap. For example, in November 2020, 83% of Nebraska
voters approved a 36% interest rate limit. Similar strong bipartisan majorities of voters or
legislatures in recent years have approved 36% or lower rate caps in many other states, including
Arkansas, Arizona, Illinois, Colorado, Montana, and Ohio, but some lenders are evading those laws
through rent-a-bank schemes. Currently, 32 states and the District of Columbia impose an interest
rate limit of 36% or less on a $2,000, 2-year installment loan, though some have loopholes for short-
term payday loans or other types of loans.

Related NCLC Resources
> Why 36%? The History, Use, and Purpose of the 36% Interest Rate Cap, April 2013
> State Rate Caps for $500 and $2,000 Loans, March 2021
> After Payday Loans: How Do Consumers Fare When States Restrict High Cost Loans?, October
2018

Bipartisan Legislation in Congress Would
Ban Forced Arbitration Clauses that Protect
Sexual Predators

FOR IMMEDIATE RELEASE: July 15, 2021
National Consumer Law Center contacts: Jan Kruse (jkruse@nclc.org) or Lauren Saunders
(lsaunders@nclc.org)

Washington, D.C. – Advocates at the National Consumer Law Center applauded bipartisan and
bicameral legislation announced yesterday by U.S. Senator Kirsten Gillibrand (D-NY), Senator
Lindsey Graham (R-SC) and Dick Durbin (D-IL), chair of the Senate Judiciary Committee, along with
U.S. Representatives Cheri Bustos (D-IL), Morgan Griffith (R-VA) and Pramila Jayapal (D-WA). The
legislation would restore access to justice and help prevent sexual harassment and assault in the
workplace, at nursing homes, and in other settings. The Ending Forced Arbitration of Sexual
Harassment Act would void forced arbitration provisions as they apply to sexual assault and
harassment survivors, allowing survivors to seek justice, discuss their cases publicly, and eliminate
institutional protection for harassers.

“We applaud this bipartisan effort to ban forced arbitration clauses that protect sexual predators
and shield them from justice. Forced arbitration is a get-out-of-jail card for sexual predators and
others that denies survivors’ right to their day in court,” said National Consumer Law Center
Associate Director Lauren Saunders.

“Sexual harassment of former Fox News anchor Gretchen Carlson and widespread sexual
harassment of Kay Jewelers employees show how forced arbitration clauses help companies hide
illegal conduct and avoid accountability for their wrongdoing,” explained Saunders. “Much of the
evidence of apparent rampant sexual abuse of female Kay Jewelers employees was kept from the
public, and even other victims, through the gag orders imposed in forced arbitration.”

Statement on PHEAA Not Extending its
Servicer Contract with Dept. of Education

FOR IMMEDIATE RELEASE: July 8, 2021
National Consumer Law Center contacts: Jan Kruse (jkruse@nclc.org) or Persis Yu
(pyu@nclc.org)

Boston – Statement by Persis Yu, director of the National Consumer Law Center’s Student
Loan Borrower Assistance Project in response to the announcement that PHEAA (FedLoan
Servicing) will not be extending its federal contract in December.

“Lawsuits by borrowers and the Massachusetts Attorney General have charged PHEAA (FedLoan
Servicing) with a long history of abusive practices that have harmed student loan borrowers and
prevented them from accessing critical relief. Today’s announcement will ensure that those
borrowers can no longer be harmed by PHEAA’s abusive practices. However, more needs to be done
to protect the millions of borrowers whose loans are currently serviced by PHEAA. In addition, this
sudden and massive transfer of loans will also have a huge ripple effect on the entire federal student
loan portfolio and could negatively impact all borrowers within the portfolio. Unless the
administration extends the current student loan payment suspension and provides widespread debt
cancellation, it is setting millions of borrowers up to fail.”

Advocates Applaud Maine Legislature’s
Passage of Bill to Protect Basic Necessities
from Garnishment by Debt Collectors

Consumer advocates applaud the passage of LD 737, An Act To Increase the Value of Property
Exempt from Attachment and Execution. The bill expands minimum protections of basic needs from
garnishment by debt collectors. In addition to expanding protections for family homes and vehicles,
the bill provides protection for up to $3,000 in consumers’ bank accounts.

“These protections will allow many Maine consumers to stay in their homes, retain their cars to get
to work and school, and maintain a small financial cushion in a bank account for inevitable
emergencies,” said Andrea Bopp Stark, staff attorney at the National Consumer Law Center.
“The new law also protects the advanced payments of the child tax credit that so many Maine
families desperately need.”

With many provisions of the Maine exempt property law not having been updated since the 1980s,
this new law will provide much-needed protection for Maine consumers, especially those hardest hit
by the pandemic. Updated protections include:

      Increased Protection of Wages: Increased from $290/week to $500/week
      Increased Protection for Family Home: Increased from $95K to $160K
      Increased Protection for Family Car: $7.5K to $10K
      Bank Account Protection: From no protection to $3k
      Child Tax Credit Protection: Any child tax credit is protected from attachment, which
      includes advanced disbursement of 2021 child tax credit payments sent after the effective date
      in late September.
      Future Proofing: Every three years the exemptions will be adjusted based on the Consumer
      Price Index.

Efforts to ensure the bill increased protections for Maine consumers were led by Maine Equal Justice
Partners along with Pine Tree Legal Assistance, Legal Services for the Elderly, the National
Consumer Law Center, and private bankruptcy attorneys.

Over Two Dozen Consumer Groups Urge
DOE’s Granholm to Immediately Act on Long
Overdue, Legally Required, Efficiency
Standard for Lighting Products

Inefficient Light Bulbs Already Sold in 2021 Will Needlessly Cost Consumers $1.8 Billion in Lost
Utility Savings

Washington, D.C. – Last week, the Consumer Federation of America (CFA), the National Consumer
Law Center (NCLC), and 24 consumer groups from across the country urged U.S. Department of
Energy (DOE) Secretary Granholm to implement the efficiency standard for household lighting
products mandated by Congress, including all the shapes and sizes added by the Obama
Administration, as soon as is practicable.

Unfortunately for consumers, the previous administration did not implement the 45 lumens/watt
“backstop” standard for a wide range of lighting products which was mandated by Congress in the
Energy Independence and Security Act (EISA) of 2007. In addition, in January 2017, DOE expanded
the type of lighting products which would have to, at a minimum, meet the backstop standard
including common household bulbs such as globe bulbs, reflector lamps, three-way light bulbs, and
candelabras. EISA required that the backstop standard go into effect on January 1, 2020, in the
event DOE did not itself adopt a standard at least as energy efficient. Each month of delay costs
American consumers nearly $300 million in lost utility savings and results in another
800,000 tons of climate changing CO2 emissions over the lifetimes of the incandescent
bulbs sold in that month.

Consumers are already benefiting from the more efficient LEDs that are available on the market, but
even greater savings are achievable as the backstop requirement would remove inefficient bulbs
 being sold. Changing just one bulb from an incandescent bulb to an LED saves $40 ⎼ $90 over ten
years. Using a low estimate of $55 in savings, and assuming a household has 20 incandescent bulbs,
switching to LEDs would translates into $1,000 in net savings over 10 years. While LEDs have
become very popular, gaining an overall market share of about 60% according to market research
firm Apex Analytics, the 40% of sales that are still incandescent products are costing consumers
dearly.

“The delay in implementing the standard on January 1, 2020, as required by law, is and will cost
consumers well over a billion dollars in lost savings and is causing the release of millions of tons of
climate change emissions into the air. Each month of additional delay will cost consumers $300
million in higher electricity bills and result in 800,000 tons of additional carbon emissions being
spewed into the atmosphere,” said Mel Hall-Crawford, CFA’s Director of Energy Programs.
“DOE needs to implement the standard post haste!” she stressed.

“Prompt implementation of the backstop standard by DOE will ensure that all consumers benefit
from up-to-date, energy-saving technology. Low-income consumers, in particular, will see even
greater benefits as they have energy bills that on average are disproportionately higher and a

majority of them are renters,” said Charlie Harak, staff attorney at the National Consumer
Law Center. “Standards will ensure that when tenants rent an apartment, the light bulbs will be
efficient and the energy bills lower, and that all consumers have access to low-cost, energy-efficient
LEDs wherever they buy their bulbs.”

The consumer groups comments can be found here.

###

The Consumer Federation of America is a nonprofit association of more than 250 consumer groups
that was founded in 1968 to advance the consumer interest through research, advocacy, and
education.

Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has used its expertise in
consumer law and energy policy to work for consumer justice and economic security for low-income
and other disadvantaged people in the United States.

Advocates Push for Increased Enforcement
and Later Rule Sunset to Prevent Improper
Foreclosures as the CFPB Issues Final
Servicing Rule

Washington, D.C. – Today, the Consumer Financial Protection Bureau (Bureau) released its final rule
under the Real Estate Settlement Procedures Act (RESPA) related to helping homeowners impacted
by the COVID-19 pandemic. The rule contains important consumer protections to help stave off
unnecessary foreclosures, but the time period for the rule’s foreclosure protections should be
extended and the Bureau should vigorously enforce it to ensure homeowners receive the intended
protections.

“The COVID-19 pandemic has led to record numbers of homeowners struggling to pay their
mortgages, especially in communities of color,” said National Consumer Law Center Staff Attorney
Sarah Mancini. “The Bureau’s final rule has the potential to significantly impact mortgage servicer
behavior, making it more likely that these borrowers can obtain loan modifications and save their
homes.”

As the economic impact of the pandemic continues to be felt around the nation, over two million
homeowners remain in payment forbearances that will end soon. Servicers will need to communicate
with record numbers of homeowners in order to process them for permanent loan modifications at
the conclusion of the forbearance plans. Many of these borrowers will exit forbearances between
September and December 2021.

The Bureau’s decision to sunset the foreclosure safeguards on December 31, 2021, however, will
leave the hundreds of thousands of borrowers who exit forbearances after that date or are unable to
obtain a loan modification option by that date without protection. Based on projected forbearance

end dates and expected servicer backlogs, many borrowers will still be addressing their COVID
hardships well into 2022. The Bureau should extend the compliance period in order to provide
protection into 2022 for borrowers who are attempting to communicate with their servicer about
loss mitigation options.

“Important protections in the CFPB’s final rule increase the likelihood that homeowners will be able
to keep their homes as they get back on their feet after forbearance. However, many borrowers will
still need these safeguards after December 31, 2021.” said Linda Jun, senior policy counsel at
Americans for Financial Reform Education Fund. “The CFPB should extend the protections so they
apply to borrowers with forbearances coming to an end in 2022.”

The final rule does the following:

      Requires servicers to follow common sense safeguards prior to initiating foreclosure during
      the compliance period, including sending required loss mitigation notices;

      Requires servicers to wait at least 30 days after a forbearance plan ends before initiating
      foreclosure, and potentially longer if the borrower is in communication with the servicer;

      Facilitates streamlined loan modifications (modifications approved without the need for a full
      application) that are consistent with the federal housing agencies’ rules; and

      Clarifies that escrow shortages may be included in a deferral or loan modification.

“At this point, the Bureau must effectively enforce the rules, comprehensively supervise servicers,
and help borrowers address servicer non-compliance,” commented National Consumer Law Center
Staff Attorney Steve Sharpe. “Servicers will be more likely to ensure that qualified homeowners can
avoid foreclosure in response to vigorous oversight. The CFPB’s supervision and enforcement
activity over the next six months will be just as important as its regulatory actions. This need is
especially pronounced for private market loans that are not bound by the rigorous protocols of
government-backed loans.”

It is important for the federal agencies to extend their foreclosure moratoria through the effective
date of the rule, to avoid incentivizing aggressive foreclosure filings before the rule takes effect. The
White House recently announced an extension of the moratoria to July 31, 2021. That end date still
leaves a gap before the new rule’s effective date.

The final rule will take effect August 31, 2021.

Related Resources

Coalition comments on the proposed rule, May 10, 2021
https://www.nclc.org/images/pdf/foreclosure_mortgage/mortgage_servicing/RESPA_NPRM_Comment
s.pdf

Mortgage Relief for Homeowners Affected By COVID-19
https://library.nclc.org/mortgage-relief-homeowners-affected-covid-19.

###

National Consumer Law Center Advocates
Praise U.S. House Vote to Repeal National
Banking Regulator’s Predatory Lending Rule

FOR IMMEDIATE RELEASE: June 24, 202
National Consumer Law Center contact: Jan Kruse (jkruse@nclc.org)

OCC Rule Protects High-Cost Lenders that use Rent-a-Bank Schemes to Evade State
Interest Rate Laws

Washington, D.C. – Advocates at the National Consumer Law Center applaud the U.S. House vote to
overturn the OCC’s “fake lender” rule, which allows predatory lenders to evade state interest rate
laws by putting a federally-chartered bank’s name on the paperwork. The House vote was 218-208
with one Republican, Rep. Grothman (R-WI), joining all Democrats to overturn the rule H.J. Res. 35,
a resolution under the Congressional Review Act (CRA), was introduced by Rep. “Chuy” García (D-
IL). The U.S. Senate passed a parallel resolution, S.J. Res. 15, on May 11. The resolution now needs
only President Biden’s signature, which is expected.

Advocates applauded the vote to repeal the fake lender rule, which protects predatory rent-a-bank
schemes that harm small businesses, veterans, and consumers across the nation and undermines the
power of states to enforce their interest rate laws and to stop predatory lending. Currently, 45 states
have interest rate caps on installment loans, depending on the size of the loan. For a $2,000, two-
year loan, 42 states and the District of Columbia limit rates, at a median APR rate of 32%. However,
banks are largely exempt from state rate caps, and predatory lenders have been laundering their
loans through a few rogue banks in order to evade state law.

“Congress’s vote to repeal the OCC fake lender rule is critical because predatory rent-a-bank
schemes are destroying small businesses, homes, and lives,” said National Consumer Law
Center Associate Director Lauren Saunders. “We urge President Biden to swiftly sign the
resolution.”

But Saunders warned that more action was needed to stop predatory rent-a-bank lenders from
evading state interest rate laws. “The OCC and especially the FDIC must crack down on the banks
that are helping predatory lenders evade state laws so that they can charge rates up to 200% APR.
Congress also must pass a national 36% interest rate limit that covers all lenders, including banks,
so that rent-a-bank schemes cannot be used by high-cost lenders to evade state laws.”

Predatory small business lenders are currently using the fake lender rule to defend a 268% APR rate
on loans totaling $67,000 to a restaurant owner in New York, where the criminal usury rate is 25%,
secured by property in New Jersey, where the legal limit is 30%. OppLoans (aka OppFi), an online
lender offering 160% APR loans in 26 states that prohibit triple-digit rate loans, cited the OCC’s fake
lender rule in defense of its loan to a disabled veteran in California, where the legal rate on the loan
is 24%. OppLoans is evading state rate cap laws supported by broad majorities of voters in Arizona,

Montana, Nebraska, and South Dakota; and also laws approved by legislatures in Maine, Ohio, and
other states.

A broad, bipartisan cross-section of experts, officials, and community groups across the nation called
on Congress to repeal the fake lender rule. They included more than 400 community organizations
from all 50 states, including faith, civil rights, consumer, small business, and disability rights groups;
and a bipartisan group of 25 state attorneys general concerned about rent-a-bank lenders that are
evading their state usury laws. The Conference of State Bank Supervisors, National Association of
Consumer Credit Administrators, National Association of Federally Insured Credit Unions, and many
other groups also supported Congress overturning the fake rule.

Resource: Predatory Rent-a-Bank Watch List with maps showing the states in which predatory
lenders are evading state interest rate caps.

National Consumer Law Center Advocates
Support Education Department Giving Loan
Relief for 18,000 Former ITT Students but
Urge More Action

FOR IMMEDIATE RELEASE: JUNE 16, 2021
National Consumer Law Center contact: Jan Kruse (jkruse@nclc.org)

Boston – Today, the U.S. Department of Education (Department) announced that it will discharge the
federal student loans of 18,000 former for-profit ITT Tech students who applied for borrower
defenses to repayment based on significant misrepresentations made by the now-shuttered school.
The Department found that ITT engaged in widespread, repeated misrepresentations regarding
graduates’ employment prospects and transferability of credits over roughly a decade leading up to
the school’s collapse in 2016, and that students found that including ITT attendance on resumes
actually made it harder for them to find employment.

Despite these findings of widespread school misconduct that ensnared ITT students in unaffordable
debt, the Department has not yet committed to providing loan relief to the hundreds of thousands of
other ITT students who suffered the same fate, but who have not filed individual borrower defense
applications–likely because they are unaware of their right to borrower defense discharge. Many of
those borrowers are in default, and thus face tarnished credit and the threat of wage garnishment
and seizure of key social safety net payments, such as the Earned Income Tax Credit and the Child
Tax Credit. Further, it is unclear whether the Department is even providing relief to all the ITT
borrowers who have applied. According to public records data from December 2020, over 32,000
borrower defense applications were filed by former ITT students and over 25,000 of those
applications were unresolved at that time.

“We are glad that the Department is finally providing this long overdue relief to some former ITT
students. These borrowers and their families are struggling, some for more than a decade, under the
weight of student loans they would never have taken on if they were told the truth about the school’s

lies regarding job placement, or if the Education Department had cut ITT off the federal aid gravy
train when it should have long ago,” said Abby Shafroth, staff attorney at the National
Consumer Law Center. “This is only a first step: hundreds of thousands of other former ITT
students were subject to the same lies, and the government must stop collecting on these fraudulent
loans and cancel their debts immediately. The Education Department also must address the other
100,000 plus borrower defense applications from borrowers at other schools, which remain
outstanding as a result of the broken, Kafkaesque process of the past four years. The Education
Department should make things right by discharging these debts now and create a fair process
going forward.”

Background

In discharging the loans for ITT students, the Department of Education used its authority under the
Borrower Defense to Repayment program within the Higher Education Act. Over the last five years,
the Department of Education has changed the applicable regulations twice, including a 2019
revision that severely curtailed borrower rights and accessibility of loan relief for defrauded
borrowers. In addition, in 2016, the Department stopped using its authority to identify groups of
students who had been harmed by their school and were eligible for a discharge, instead granting
relief only one student at a time. This is the first time since 2017 that the Department recognized
new grounds for a loan discharge.

More information: Group Letter to Secretary of Education Cardona Urging Borrower Defense
Relief, Apr. 13, 2021

New Maryland Law Will Protect Low-Income
Families from Overpriced Electricity and Gas

Maryland Joins New York, Illinois, Connecticut, and Ohio to Rein in Abuses by Competitive
Energy Supply Companies

FOR IMMEDIATE RELEASE: June 7, 2021
National Consumer Law Center contact: Jan Kruse, jkruse@nclc.org

Washington, D.C. – National Consumer Law Center advocates applauded Maryland’s General
Assembly for passing the Energy Supply Reform Bill (SB31/HB397). The effort was led by
Maryland’s Senator Mary L. Washington and Delegate Brooke E. Lierman, and advocates in the
Energy Supplier Reform Coalition. The law goes into effect on January 1, 2023, and will protect low-
income consumers from paying more to third-party suppliers than the utility company rate for
electricity and natural gas.

“Congratulations to Maryland for joining other leading states to protect vulnerable consumers from
sky-high utility bills,” said National Consumer Law Center Attorney Jenifer Bosco, who

provided written testimony about how these third-party suppliers (often called “alternative” or
“competitive” suppliers) charge customers millions of dollars–in New York, hundreds of million
dollars–more than they would have paid to the regulated utility company. “Overpriced utility bills
especially harm low-income consumers who have limited assets, and drain vital resources from
assistance programs that ratepayers and taxpayers support,” she said.

According to the Maryland Office of People’s Counsel, Maryland households who signed up
to buy electricity or natural gas service from third-party energy supply companies paid
approximately $54.9 million more each year, starting in 2014, than if they had bought the
same service from their utility companies. The AARP Maryland also supported the bill, noting in
an op-ed that these third-party companies were “ripping off low-income and elderly customers on
limited incomes.”

Third-party energy supply companies are known for aggressive marketing through robocalls and
door-to-door solicitations, operating in many states. They often claim that consumers will save
money by switching to them, but then often increase their rates, wiping out any savings and costing
customers even more money for the same utility service. Under the new law, utility customers who
are enrolled in energy assistance programs will no longer be charged more than the utility company
rates for electric and gas service, and cannot be charged a termination fee for switching back to the
utility company. Several other states have adopted similar protections to shield low-income
customers from being tricked into overpaying for utilities, including New York, Illinois, Connecticut
and Ohio. Other states such as Massachusetts, Maine, Rhode Island, and Delaware that allow third-
party suppliers but that have not enacted protections along these lines should take a close look at
what Maryland and these other states have done to protect utility customers.

Collecting Criminal Justice Debt Through the
State Civil Justice System: a Primer for
Advocates & Policymakers

Report
      Appendix A: State Laws Allowing Restitution Obligation to Be Treated as a Civil Judgement
      Appendix B: Statutes Allowing Fines, Court Costs, or Indigent Defense Costs to Be Treated as
      Civil Judgements
      Table 1: Statutes Denying the Usual Exemption Rules to Criminal Justice Debt
      Table 2: At a Glance: Will Moving Collection of Criminal Justice Debt to the Civil Justice
      Collection System Achieve the Improvements Advocates Seek?

Published May 28, 2021
©National Consumer Law Center, Inc.

Overview

The use of the criminal justice system to collect fines, fees, restitution, and other types of criminal
justice debt has been condemned as punitive, self-defeating, discriminatory, and, in some cases,
unconstitutional. This National Consumer Law Center report looks at the advantages and
disadvantages of using a state’s existing civil justice system as an alternative.

Key Recommendations

Using the civil justice system to collect criminal justice debt offers the hope of a fairer, less punitive,
and less self-defeating system. But advocates and policymakers should not assume that the existing
civil justice collection system in their state offers the improvements they seek. If advocates and
policymakers decide they should move collection of criminal justice debt to the civil system, they
should ensure that their proposal:

      Identifies collection through the civil justice system as the exclusive method of collection.
      Makes the state’s ban on imprisonment for civil debt watertight, and ensures that it applies to
      criminal justice debt.
      Takes the debtor’s ability to pay into account at the point of imposition and the point of
      enforcement.
      Preserves the sentencing court’s authority to order remission of criminal justice debt.
      Preserves a basic income and essential property from collection.
      Prevents the amount of debt from ballooning.
      Applies reasonable time limits to efforts to enforce the debt.
      Reduces or eliminates collateral consequences of criminal justice debt.
      Strips away any financial incentives that could lead to overuse or misuse of civil justice
      collection methods.

Please read the report for the full list of recommendations.

Related Resources

Online Content

      NCLC’s work on criminal justice

Report: Criminal Justice Debt in the South: a Primer for the Southern Partnership to Reduce
     Debt, Dec. 2018

Legal Treatise

     Collection Actions