A lot is going on in the financial justice sphere these days! Let’s start with some positive news. The Consumer Financial Protection Bureau (CFPB) announced on October 5 a final rule on payday and vehicle title loans up to 45 days. The rule includes a requirement that lenders must determine up front the borrower’s ability to repay (ATR) the loan in full on the due date, which represents a huge victory for consumer advocates –including Woodstock— who have long urged an ATR standard to protect consumers from being caught in debt traps. This is a major step in the right direction, but much work remains to be done. In states like Illinois, where payday loans with interest rates over 400 percent are legal, this rule could save consumers a lot of money. We are watching closely to see if the industry responds by driving borrowers to other risky products that are not covered by the rule. Woodstock hosted a press conference with U.S. Senator Dick Durbin, Illinois State Senator Jacqueline Collins, State Representative La Shawn Ford, and allies about this rule and Senator Durbin’s bill for a 36-percent rate cap on October 12.

While consumer advocates and most banks and credit unions (who are effectively exempted) are generally pleased with the final payday rule, the powerful payday and title loan industry and the elected officials who accept their money are preparing to undo the rule through various methods, including repeal under the Congressional Review Act and litigation. The good news on payday lending was tempered by bad news coming from the Office of the Comptroller of the Currency (OCC), which regulates national banks.  On the same day as the payday loan rule, the OCC, which is run by a Trump appointee (see more on that below), rescinded guidance from 2013 regarding “deposit advance products.”  “Deposit advance product” is another name for a payday loan by a bank.  The 2013 guidance effectively put an end to that product; the OCC’s recent action opens the door once again to this dangerous product.

Unfortunately, the U.S Senate and Vice President Mike Pence used the Congressional Review Act and Senate Joint Resolution 47 on October 24 to repeal the final CFPB forced arbitration rule, which prohibited waivers of class action litigation by wronged consumers, who generally get ripped off when forced to resolve disputes through arbitration. All Republican members of the Senate except two voted in favor and Pence had to break the 50-50 tie vote. This means the next time consumer rights are violated in scandals, such as the Wells Fargo fraudulent account openings or the Equifax data breach, those members of Congress and the Trump Administration will be held responsible for ensuring that consumers obtain relief. The President could veto S.J. Res. 47, but we are not holding our breath. While we are deeply disappointed in this result, Woodstock will be working hard with our allies to ensure that our Members of Congress put the interests of consumers and constituents ahead of the special interests that line their pockets.

Woodstock was in Washington, D.C., in September and made visits to the staffs of several of our elected officials from Illinois, including Sen. Durbin, Sen. Duckworth, Rep. R. Davis, and Rep. Schakowsky. Issues discussed included payday lending, forced arbitration, and a rule under Section 1071 of the Dodd-Frank Act (Section 1071), which would require both banks and non-banks to report to the CFPB critical pieces of data such as borrower race and gender.

With Halloween around the corner, it’s time to be afraid, very afraid! Woodstock and allies California Reinvestment Coalition, Maryland Consumer Rights Coalition, and Reinvestment Partners of Durham, NC, were invited by Keith Noreika, Acting Comptroller of the Office of the Comptroller of the Currency (OCC), to visit on September 20. The OCC regulates national banks. The Trump Administration appointed Mr. Noreika as the Acting Comptroller and has since nominated James Otting, a One West banking executive, to be the next Comptroller. A U.S. Senate Committee has confirmed Otting’s nomination, but the full Senate has not yet voted. Suffice it to say that Noreika has overstayed his welcome. “Acting” officials are, by law, permitted to serve for only 130 days. Mr. Noreika’s 130 days ended in September. Our visit with Mr. Noreika gave us our first view of what to expect from the Trump administration. Mr. Noreika also played a role, along with Treasury Secretary Mnuchin, in urging Senators to repeal the CFPB forced arbitration rule. President Trump’s financial regulator appointees will fill not only the OCC opening, but also openings at the Federal Reserve Board of Governors (Randy Quarles was recently confirmed, but there are other openings and no decision yet on whether to rename Janet Yellen as Chair), the FDIC (when Chair Marty Gruenberg’s term ends in November of 2017), and the CFPB (when Director Cordray’s term expires in July of 2018). I can only hope that other appointees will not be hostile to the importance of data collection and enforcement of fair lending laws, the Community Reinvestment Act (CRA), and consumer protection. Woodstock has always had meetings with the leaders and senior staff of these agencies and have appreciated the opportunity to have a candid exchange of ideas and information. We hope to continue such meetings and exchanges as the new appointees settle in.

Woodstock and other allies were invited to participate in recent meetings and calls with the Treasury Department about the Community Reinvestment Act, and with the Federal Reserve about retail banking services. Although the Treasury call involved more listening than policy proposals from the Department, we are very concerned about several policy recommendations included in Treasury’s recent report and de-regulation recommendations, including repeal of Section 1071.

Speaking of small business lending, Woodstock published the third in its series of Patterns of Disparity reports on small business lending in August. The third report focused on significant declines in bank lending to small businesses in the Detroit and Richmond, VA, regions, and the disproportionate declines in lending to small business owners in low- and moderate-income areas and in communities of color. Based on these declines and on the lack of data regarding applications for loans and loans made by non-bank lenders, Woodstock has strongly supported the CFPB’s authority to write rules implementing Section 1071. We submitted detailed comments with our allies in response to the CFPB Request for Information. We will continue to press for strong section 1071 rules so that more entrepreneurs in disinvested areas can both start and expand their businesses and create jobs and amenities in these areas. Watch for our next report on the Minneapolis and Fresno County, CA, regions on November 2! Meanwhile, we are pleased to report that Fifth Third Bank and CIBC (formerly The Private Bank) have reported good progress on their CRA commitments to open new branches and increase small business lending in underserved LMI areas.

Woodstock has been leading the charge against approval by the Illinois Department of Financial and Professional Regulation (IDFPR), an agency in the Rauner administration, of the Illinois currency exchange industry’s proposal to significantly raise fees for cashing checks. The proposed rate increase would disproportionately impact people of color, low-income people, older adults, people with disabilities, and immigrants. We testified at the original public hearing, submitted comments and research on how other states regulate check-cashing fees, organized a campaign to request a second hearing after the IDFPR initially approved the industry request, held a press conference with State Senator Jacqueline Collins and allies from Heartland Alliance and COFI/PowerPac and other community members, testified  at the second hearing, and submitted additional comments and research suggesting that IDFPR institute a stratified rate structure similar to other state policies where rates differ based on levels of risk. For example, government checks cost less to cash than personal checks. Because we did not get the opportunity to respond to the industry speakers at the second hearing, we wrote an op ed, which was published in Crain’s Chicago Business, included in this newsletter. The next step in this process is for IDFPR to issue its final decision and for the Illinois General Assembly’s Joint Committee on Administrative Rules to take up the rulemaking. Woodstock and its allies will continue to fight for fair check-cashing rates that are not overly burdensome on vulnerable consumers.

Kudos to Richard Thaler, the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business, for being awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2017! Among other things, Professor Thaler revolutionized retirement savings and greatly influenced the development of the Illinois Secure Savings Program (by Woodstock and our allies) for workers who lack access to employment-based retirement savings plans. As one of the leaders in the field of behavioral economics, his research helps us to understand that humans often make really bad financial decisions that are not in our self-interest, especially when we are experiencing the stress of scarcity of money, and that there are ways that we can make saving easier for mere mortals through strategies such as automatic enrollment and default investments.

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