The Good, the Bad, and the Ugly

Alternative Financial Services should hire Clint Eastwood as a spokesman.  Talk about the good, the bad and the ugly.  Because the banking sector will not issue loans to high risk applicants, room in the market has been made for alternative financial services.  It makes sense to offer short-term, high(er) interest rate loans to those who may not be able to pay off larger long-term loans due to the demand.  When dealing with predatory lending, the good can be hard to find, but it is important to note that the market has made way for these services. 

Where’s the bad?  The interest rates are incredibly high on many of these loans.  Even though payday loans are regulated at 36% APR, adding all the additional fees to the interest rate payments results in loan payments rivaling those of a 300% APR loan.  Also, supply and demand take on a different form with certain alternative financial services.  They perpetuate their own demand.  Not unlike a drug dealer, a payday lender sells a product knowing the client will come back for more.  If the borrower needs the money now, he or she will surely need money later to pay off the loan. 

Was that the ugly?  Almost.  Not only do these companies back borrowers even further against the ropes, but they are not honest in doing so.  The real ugliness is the deceit.  Lies of omission, rushing through the paper work, and intentionally clouding over the details are tactics used by payday and car title lenders to ensure the issuing of a high interest, fee-riddled loan to a borrower that has the potential to keep making this industry money.  To see the real effect of lies and poor communication, read Tasha Kate’s article in The Daily Progress about a recent law suit against Allied Cash Advance for violating the Truth in Lending Act.

Consumers are both responsible for themselves and in need of protection from predatory practices.  Consumers should be allowed to make their own financial decisions, but the paper work and employees that they deal with should be held to standards of clarity.  Contracts should be easy to navigate, short, and the all fees should be explicitly stated in one spot.  Lenders should be held to a code of ethics, and communications within a company should be better as to avoid wrongful foreclosure or repossession.

Robo-Signing Rampant in Virginia Mortgage Documents

Last week 8 News Investigates aired a two-part segment (Part I and Part II) uncovering Virginia mortgage documents that contain fraudulent signatures. Signatures of known robo-signer Linda Green were found on document after document. According to local attorney Tom Domonoske, these fraudulent documents can cause big problems, especially when homeowners are trying obtain title insurance.

In response to the Channel 8 News report, VPLC interns went down to the Richmond Circuit Court to look for more fraudulent documents. Not only were there many more documents containing Linda Green's signature, but also of other known robo-signers including Jeffrey Stephan and Bethany Hood. Many of the signatures have various forms indicating that numerous people were signing the same name.

When asked if the banks behind the fraud should be held accountable, Attorney General Ken Cuccinelli said "absolutely, absolutely, and we're intent on doing that."

Hopefully there will be accountability for robo-signing. In an article this week by the Associated Press, Senator Sherrod Brown said "Wall Street and some in Washington want us to believe that robo-signing is a thing of the past, but the same risky practices that put our economy on the brink of collapse continue to infect the housing market." Senator Brown, the chair of the Financial Institutions and Consumer Protection Subcommittee said that the subcommittee will hold a hearing on the robo-signing issue.

Additionally, the attorneys general in Minnesota, Massachusetts and Illinois have reported that they are looking into the extent of robo-signing in their states.

Getting the CFPB off its Feet

     The highly partisan struggle surrounding the creation and opening of the Consumer Financial Protection Bureau on this coming Thursday has taken another turn as Obama announces his nominee for director.  Richard Cordray, the current head of the enforcement division of the CFPB and former Attorney General of Ohio, has been named by Obama to vie for the position instead of Elizabeth Warren, the Harvard Law Professor responsible for the creation of the bureau.  For insight into Obama’s decision and Republican opposition, click here for Appelbaum's article from the New York Times.    
     To see what consumers are asking of the CFPB, check out Ron Lieber’s July 16^th article, “Consumer Watchdog is All Ears for Ideas.”  As mentioned in an earlier post on this blog, it remains hugely important to voice your opinions to the new watchdog created to protect you as a consumer.  

NBC 12 On Your Side Alert: Online Loans

On Friday, NBC 12 aired a segment discussing predatory online loans in Virginia. VaPERL's coordinator, Dana Wiggins was featured along with the hotline that consumers can call for assistance. Hopefully more consumers will have gotten the word that online loans are illegal and unenforceable. If you know anyone who is willing to share their story, let us know because there are reporters willing to follow predatory lending.

To see the story, click here.

New Hampshire Vetoes Bill Legalizing Excessive Interest Rates

Sharkie would be proud of New Hampshire for holding strong against the predatory lending lobby. This week Governor Lynch vetoed a bill that would have allowed for interest rate caps of 25% per month. New Hampshire currently caps interest rates on car title loans at 36% APR. In the Governor's veto message, he recognizes that car title loans with 300% ARP interest rates would be detrimental to families, communities and the economy. Hear, hear!

View the whole press release here.

The Face of Responsible Lending in Virginia

Reformed loan shark, Sharkie, is a staunch supporter of responsible lending in Virginia.  To meet Sharkie and learn more about his mission, visit his Facebook page.  Sharkie has teamed up with the Virginia Interfaith Center for Public Policy and the VPLC to send out pledge cards to the candidates running for the Virginia State Legislature.  The pledge cards inform the candidates and offer them the opportunity to publicly commit to supporting a fee-inclusive 36% annual interest rate cap for lenders.  

Outreach Update

To date, VPLC interns have supplied informational materials to two Richmond Public Libraries (Main and Westover Hills,) the WIC Office, YMCA Daycare, J Sergeant Reynolds, the VCU financial aid office, the Goodwill office, Housing Opportunities Made Equal, the Richmond Outreach Center, HillTop Promises, and the 3^rd Street Deli.

Lobbying 101 from Delegate Jennifer McClellan

Yesterday, Delegate Jennifer McClellan of the 71^st House District met at the Housing Opportunities Made Equal (HOME) building in Downtown Richmond for a Community Conversation on Housing.  After a few “housing snapshots” from members of HOME, the conversation turned to how to pass housing legislation.  

The take-home message from McClellan was to act early and find the middle ground.  She encouraged public advocates to start talking to delegates and senators in the summer because those who wait until the beginning of the session to bring up a point are often not heard.  Simply put, nonprofit lobbyists have to compete with big business.  Presenting concise, clear talking points to a representative early on is only part of the battle.  Attending committee and taskforce meetings is a must.  Assume that a legislator will only listen to his or her constituents, so go out and find people to stand up for the issue within the legislator’s district.  

Delegate McClellan also asserted the importance of “just stick[ing] with it,” as she cited the long sought after 2008 payday lending legislation as an example.  “Never underestimate the power of a letter or a phone call,” advises McClellan.  To learn more about your legislators, visit the General Assembly website.