Dear Chairman Barr and Ranking Member Foster:

As consumer protection and civil rights organizations, we write to express our concerns with two legislative proposals being discussed at today’s hearing, namely H.R. 6789, the Rectifying UDAAP Act and a still unintroduced bill to amend the Truth in Lending Act to allow covered entities to offer small-dollar credit products and for other purposes.  These proposals are deeply misguided, and our organizations urge Committee Members to oppose and prevent their advancement.

H.R. 6789, the “Rectifying UDAAP Act”

 This bill would narrow the scope of UDAAP under the Consumer Financial Protection Act and hinder the ability of the CFPB to determine when an activity is an unfair, deceptive and abusive practice. It would hamper the CFPB’s ability to identify UDAAPs and significantly raise the threshold for abusiveness. The bill accomplishes the long-standing goal of preventing the CFPB from defining discriminatory practices as UDAAPs, even though discrimination is inherently unfair and harmful.

It would slow down the CFPB’s efforts to implement enforcement actions. For example, because it permits entities that self-report violations to have special notification rights, it extends delays between the identification of a UDAAP and an enforcement action to prevent it. It would also introduce new hurdles to providing monetary relief.

By requiring the CFPB to conduct unnecessary rulemaking to establish policies and procedures for issuing penalties, it could leave consumers at risk of being harmed by UDAAPs. It is also concerning that the bill would require the rulemaking to include a cost-benefit analysis, as such a step could lead to the result where the profits derived by an unfair or discriminatory practice are weighted as a benefit.

We strongly oppose this bill.

 H.R. ___, a bill to amend the Truth in Lending Act to allow covered entities to offer small-dollar credit products and for other purposes.

In the guise of adopting safeguards for small-dollar credit, this bill would exempt any bank or other creditor that offers specified small-dollar loans from any civil penalties or damages for violation and law in the entire Title 15 of the United States Code in connection with the small-dollar product. That title covers 122 chapters, including the entire Chapter 41, which includes the Truth in Lending Act, the Restrictions on Garnishment of Social Security and other federal benefits, the Credit Repair Organizations Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, and the Electronic Fund Transfer Act, as well as the antitrust provisions of Chapter 1 and many other laws. Lenders would be able to violate these laws with impunity.

We strongly oppose this bill.

Americans for Financial Reform

Center for Responsible Lending

Consumer Federation of America

National Consumer Law Center (on behalf of its low-income clients)

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“We applaud the CFPB for taking this needed step to rein in junk NSF fees,” said Adam Rust, Director of Financial Services for the Consumer Federation of America. “When a bank consciously chooses not to honor a payment request, but still charges a fee, it prioritizes its greed above its customer’s needs and adds insult to injury. It is telling that most banks have stopped charging NSF fees, and revealing that some have not. The CFPB’s rule will force financial institutions that have been dragging their feet on doing away with these junk fees to finally stop their harmful practices.” 

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VER HOJA DE INFORMACIÓN

The post Consumer Understanding of Buy Now, Pay Later in California FACTSHEET appeared first on Consumer Federation of America.

The new rule closes a regulatory loophole that had permitted financial institutions to offer overdraft services but exempted them from prohibitions in the Truth in Lending Act (TILA). When the Federal Reserve implemented TILA in 1968, it decided to not include overdraft services within the definition of credit. At the time, the practice of covering occasional check overages was a discretionary service extended to customers through manual review. However, with the introduction of the debit card in the 1980s, banks automated the service and introduced them at scale. Overdraft fees morphed into a line of revenue of more than $10 billion annually.

“Banking is supposed to be about making loans, taking deposits, and facilitating payments, but at some point, some banks decided it was also about charging junk fees,” said Adam Rust, Director of Financial Services for the Consumer Federation of America. “The CFPB’S proposed rule restores balance in the relationship between consumers and their financial institutions.

The CFPB’s proposal says that if a bank wants to make obscene profits on overdraft fees, then the service will be regulated as credit, but if it keeps prices to a reasonable and proportional level, it has a safe harbor.

The rule gives banks who want to charge overdraft fees a choice: they can charge a reasonable fee, in which the price is closely tied to the cost banks experience from overdrawn account balances, or they can build a profit-generating overdraft service, but as “covered overdraft credit,” with required pricing disclosures and regulatory treatment consistent with credit cards.

“Ideally, more banks would follow the lead of the ones that have eliminated overdraft fees entirely,” said Adam Rust. “But under the CFPB’s new proposal, while a financial institution can still choose to derive profits from overdraft, new disclosure rules will distinguish it unfavorably from its rivals.”

The CFPB believes the new rules will save consumers at least three billion dollars per year.

Some banks have eliminated these fees, others have reduced the penalty and limited the number of charges, but many other institutions still need to alter their practices. In 2022, consumers paid approximately $8 billion in overdraft fees. Before that, annual fees were regularly greater than $11 billion. However, some financial institutions have never changed their policies, and their dependence on those revenues comes at the great expense of their customers.

See the proposed rule and the corresponding fact sheet.

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The groups further urged the CFPB to expand supervision to other large non-bank companies that offer similar payment services access through debit cards, prepaid cards, or in person. The comment included specific requests to ensure supervision extends to larger participants in correctional payments services and government benefit cards markets.

The CFPB should move forward expeditiously, as it is vital to ensure payment apps and digital wallets operate under the same rules as traditional payment systems.

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“By making it difficult for consumers to report fraud and maintaining policies of not reimbursing victims of imposter scams, Venmo and Cash App are claiming to ‘hear no evil and see no evil,’” said Adam Rust, Director of Financial Services at the Consumer Federation of America.  “Fraudsters will exploit any advantage they can find, and as long as they believe they can operate on a payment app’s platform with impunity, they will harm consumers and small businesses to the tune of billions. We applaud Senators Brown, Reed, and Warren for holding Venmo and Cash App accountable.”

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Under the proposal, the CFPB will supervise larger payment app and digital wallet providers for compliance with rules for the electronic transfer of funds, privacy provisions in the Gramm-Leach-Bliley Act, and against unfair, deceptive, or abusive acts and practices. All of these steps will advance the interests of consumers by holding Big Tech accountable to the same rules that apply to other payments providers.

The proposal will close loopholes in consumer financial protection law:

“Today’s announcement marks a significant step toward protecting consumers in an economy where consumers increasingly rely on non-bank Big Tech firms to transfer their money,” said Adam Rust, Director of Financial Services at the Consumer Federation of America. “The proposal will close a loophole that has permitted these firms to benefit from regulatory inconsistencies and represents another way that the CFPB is moving to protect consumers from Big Tech.”

The proposed rule will support competition between Big Tech, other businesses, and depositories that facilitate payments:

“We should be concerned whenever the line between commerce and banking is permitted to blur. When a large firm engages in both, it undermines competition, destabilizes the economy, and poses risks to consumers. For these reasons and others, requiring separation between the two has been a fundamental principle of banking regulation in the United States. Big Tech payment apps and digital wallets have been able to operate outside of these boundaries. By closing this loophole, the CFPB is moving forward to hold Big Tech accountable to play by the same rules as everyone else.

“Big Tech has built payment apps and digital wallets to gain an unfair advantage over competitors that do not have the size and resources to integrate payment technology into their businesses. The CFPB’s proposal will restore an imbalance in the marketplace between Big Tech and Main Street businesses. Relatedly, the proposal fosters changes to support regulatory parity between Big Tech and insured depositories, ensuring that all entities facilitating payments comply with consumer financial protection laws.

The proposed rule will protect consumer privacy:

“Today’s announcement heralds more protection for consumer privacy. We should be concerned whenever a company has information about your finances and shopping behavior. Big Tech has used the information it can glean from its payment services to target consumers for financial products. We applaud the Bureau for this proposal and the others it has taken to address the encroachment of Big Tech on consumer privacy.

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“BNPL lenders are making it easier for borrowers to use high-cost loans for everyday purchases,” said Peter Smith, a Senior Researcher at the Center for Responsible Lending. “At the same time, they are trying mightily to hide the true costs and risks of these loans.”

Key findings from the report indicate that, among survey respondents who used BNPL:

• 37% incurred an overdraft fee in the last 6 months.
• Over 16% had been charged a late or rescheduling fee, or other related fee, by the BNPL provider or their bank, within the last 6 months.
• Those with lower incomes were more likely than those with higher incomes to report using BNPL credit because the purchase would not otherwise fit in their budget.
• Nearly three-quarters (73%) viewed BNPL as most similar to either a credit card or another form of installment loan, both of which are subject to the Truth in Lending Act and other state and federal credit laws.
• Consumer understanding about how BNPL functions and is regulated was very low.

The report emphasizes the necessity for enhanced regulatory frameworks to ensure consumer protection, transparency in agreement terms, and the establishment of standard practices for late payments and dispute resolutions.

“The current landscape of ‘Buy Now, Pay Later’ services, marked by limited oversight and insufficient consumer safeguards, poses a real threat,” said Susan Weinstock, CEO of Consumer Federation of America. “Many, particularly lower-income consumers, stand at risk of being ensnared by mounting fees and deepening financial instability.”

The findings underscore the urgent need for stakeholders, policymakers, and the BNPL industry to collaborate in addressing these issues, prioritizing consumer rights and financial health across the nation.

The full report is available for further review and consideration. For additional information, inquiries, or access to the report, please contact the Center for Responsible Lending Communications Director, Al King, at Alfred.king@responsiblelending.org. or Consumer Federation of America Communications Manager Nicholas Rubando, at nrubando@consumerfed.org.

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Consumer Federation of America (CFA) is an association of nearly 250 non-profit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education.

Center for Responsible Lending (CRL) is a non-partisan, nonprofit research and policy advocacy organization working to promote financial fairness and economic opportunity for all, end predatory lending, and close the racial wealth gap. CRL’s expertise gives it trusted insight to evaluate the impact of financial products and policies on the wealth and economic stability of Asian, Black, Latino, rural, military, low-wage, low-wealth, and early-career workers and communities. CRL is an affiliate of Self-Help, one of the nation’s largest nonprofit community development financial institutions. Our work leverages the strength of partnerships with national and local consumer and civil rights organizations.

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1. More closely tailor late fees to the amount of the debt owed by the cardholder;
2. Require a mandatory waiting period of several days before a late fee can be assessed;
3. Decline to incorporate deterrence as a factor in setting late fee rules and safe harbor amounts;
4. Include the savings from online-only statements in the calculation of costs, and require a postal mail notification before a late fee can be imposed for an online-only account; and
5. Exclude the costs of being a furnisher of information to consumer reporting agencies.

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First, although the majority of consumers maintain a balance in their P2P apps, most of these applications lack FDIC deposit insurance. Secondly, given the instantaneous nature of payments, there is a high and growing prevalence of scams and fraud associated with P2P apps. This problem is compounded by the absence of meaningful oversight, accountability, or consumer protections beyond disclosures and warnings, resulting in little or no recourse for defrauded consumers. Third, these apps collect vast amounts of consumer data, especially financial data which raises significant privacy concerns. Finally, it is questionable how much these apps do to promote financial inclusion, a common industry claim, especially given that consumers who use P2P payment apps likely need a smartphone and wireless data or internet access and a significant amount of low-income consumers lack a smartphone and/or high speed internet access. 

Lack of Federal Deposit Insurance 

Issued by the Federal Deposit Insurance Corporation (FDIC), federal deposit insurance protects consumers’ deposits should a bank institution fail, ensuring public confidence in and stability of our financial system. However, non-banks and P2P apps are not federally-insured or even regularly supervised or examined by federal financial regulators. Even if non-banks partner with FDIC-insured banks, funds sent to or held in the nonbank are not FDIC-insured. Although some cash funds in P2P apps are FDIC insured, insurance only covers limited funds in certain instances. For example, for Venmo users, funds are eligible for pass through insurance when the user has bought cryptocurrency or added money through direct deposit or remote check capture. Therefore, for the most part, consumers maintaining large balances in P2P apps do not have their funds protected. 

Without deposit insurance, P2P apps have the ability to freeze and deactivate consumers’ accounts and funds. Consumers unwittingly agree to these terms buried in the fine print of user agreements during account creation. Further, some P2P products lack fair notice and appeal process should a consumer’s account be closed. P2P providers do not publish reports of account freezes and closures, further obscuring this conduct from consumers. There are no comprehensive federal regulations for non-bank financial institutions, subjecting consumers to the unchecked conduct of sophisticated financial entities, leaving consumers to fend for themselves. As more consumers use P2P systems, they may be at greater risk than they know.   

High Prevalence of Fraud and Scams, Coupled with Lack of Accountability and Oversight 

Nearly 18 million Americans were scammed or defrauded while using P2P apps in 2020. The convenience, speed, and ease of P2P systems create an opportune environment for fraudsters and scammers. These bad actors use a variety of tactics to lure consumers into sending money, because the scammer will immediately receive the funds due to the quick nature of these systems.  In addition, consumers are also victims of phishing or hacking of P2P apps and resultingly, see that their account transferred money without their consent.  

P2P apps have disclosures, warnings, and certain security checks, in part due to the high prevalence of fraud and scams. However, these warnings are insufficient in protecting consumers and place the risk and onus unfairly on the consumer. Although consumer alerts published by federal regulators and advocacy groups help inform consumers, they do little to actually protect consumers when using these products.  

In the absence of safeguards being built into products, consumers should, at the very least, have meaningful recourse when faced with account closures or deactivations. Despite these rising concerns, there is minimal accountability or oversight of P2P providers, and little has been done to make these products safer for consumers. Those consumers who have been defrauded or scammed are rarely made whole after losing funds to scams or fraud.  

Defrauded consumers are often left without any resolution for their stolen money due to ambiguities and gaps in existing consumer protection regulations. Regulation E implements the Electronic Fund Transfer Act (EFTA), but in its current form does not protect consumers when they have been defrauded into making a payment.  

That is why CFA supports Chairwoman Maxine Waters’ Protecting Consumers From Payment Scams Act. This bill would amend EFTA and protect consumers from liability when they are defrauded into initiating a transfer. It would also clarify that responsibility to resolve errors applies. Finally, this bill would clarify that EFTA’s error resolution procedures also apply when the consumer makes a mistake, such as when the consumer sends the incorrect amount of funds or to the wrong recipient.  

Ineffective Consumer Privacy, Especially of Financial Data 

P2P apps collect enormous amounts of consumer data and some even include consumer consent to data aggregation in their initial terms and conditions. P2P companies are not transparent with consumers about the amount of data they collect, what they use the data for, or whether they are selling it to other companies.   

Further, the default privacy settings for P2P apps are not in the consumer’s best interest for their financial privacy. For example, Venmo’s default settings publicly show transactions between users, including the parties’ names and attached message with the payment. One does not need an account to see these transactions, and users must manually change two areas of their settings to hide transactions from public view. These practices clearly lack adequate privacy protections, which, coupled with unclear initial privacy notice, puts both consumers and their financial data at risk of great harm.  

Financial Inclusion 

Finally, despite industry claims, it is unclear whether P2P apps expand financial inclusion for unbanked consumers and other marginalized communities. At first glance, non-banks like P2P apps may seem like an attractive alternative that can aid financial inclusion. However, more than 80% of mobile payment users connect their bank account, credit, or debit card to a smartphone application, requiring at least a smartphone and data, and best used with internet access. Yet, more than 40% of adults in low-income households lack high-speed internet access in their homes and roughly a quarter of low-income consumers lack a smartphone, making P2P applications difficult or impossible to access. This results in a large barrier to entry for many marginalized consumers, and P2P apps are therefore in all likelihood not expanding services to these consumers.  

Conclusion 

As P2P app usage grows, CFA and other consumer advocates grow increasingly concerned about the lack of consumer protections built into the products combined with extremely minimal federal oversight and accountability. Funds left in P2P apps are not covered by FDIC insurance, which means that P2P apps can freeze funds or deactivate accounts, leaving consumers without access to their stored funds. In addition, consumers lack recourse when defrauded, scammed or hacked, which is occurring at increasingly alarming rates. Plus, P2P apps have access to large amounts of consumer financial data and consumer privacy is insufficient. Finally, although these apps can certainly meet some consumer’s needs, it is unlikely that P2P apps are expanding financial inclusion to underserved consumers.  

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The post Predatory Lenders TAB Bank and EasyPay Finance Harm Veterans and Military Servicemembers with Loans up to 189% APR appeared first on Consumer Federation of America.

EasyPay Finance, which charges up to 189% APR, is popping up as a financing option at furniture stores, auto repair shops, pet stores and other retail outlets everywhere – including at shops near military bases where the loans are more likely to affect servicemembers. For example, EasyPay Finance is available at numerous auto repair locations and furniture stores that offer EasyPay loans near a military base.

“The fact that predatory lenders continue to target military families is unacceptable,” said Besa Pinchotti, CEO of the National Military Family Association. ”Military families make tremendous sacrifices for our country every day. It’s outrageous that after all the work we’ve done to protect our military families, they continue to be preyed upon by lenders—especially when they’re at their most vulnerable—needing money for car repairs, to furnish their homes after a military-mandated moves or to make ends meet during a deployment.”

Because banks are exempt from state interest rate caps, TAB Bank helps disguise EasyPay Finance loans as “bank loans,” enabling it to charge exorbitant rates in states that prohibit them. One Virginia military consumer complained about “illegal” 119% interest that appeared to be far above Virginia’s legal rate.

“The men and women who have served our country deserve better than predatory loans,” said Paul E. Kantwill, Executive Director of The Rule of Law Institute at Loyola University Chicago School of Law. “At 100% to 189% APR, TAB Bank and EasyPay Finance’s loans evade state interest rate laws and harm members of the military community.”

The complaints indicate that EasyPay Finance and TAB Bank may be violating or evading the Military Lending Act, a law that limits the annual interest rate on loans to military servicemembers and their dependents to no higher than 36%. For example, one servicemember in Virginia got stuck with 96% APR for an auto repair and couldn’t get EasyPay to fix the rate. Another servicemember in Nevada advised the pet store that they were military but “I am now paying 189% interest on my loan. When I called [EasyPay] they were rude and said they do not have to lower my interest rate at all and they based it all on a loophole.”

“EasyPay and TAB Bank are using the harmful rent-a-bank model to evade state and federal laws and lure servicemembers and veterans into predatory, outrageously priced loans for auto repairs, pet adoptions, and other retail purchases,” said Rachel Gittleman, Financial Services Outreach Manager of the Consumer Federation of America.

“It is unconscionable that TAB Bank and EasyPay Finance are making loans with up to 189% interest to servicemembers and veterans,” said Lauren Saunders, Associate Director of the National Consumer Law Center. “Auto repair shops, pet stores, and other retailers concerned with their reputation should stop steering customers to predatory loans by TAB Bank and EasyPay Finance.”

Numerous military consumers have complained about EasyPay loans to the Consumer Financial Protection Bureau, reporting:

• Outrageous interest rates of 96% to 189% charged to servicemembers, veterans or their family members, sometimes in states that do not allow those rates.
• Payments for months and years that do little to reduce the loan balance.
• Interest rates hidden in fine print. Applications required to be completed on small cellphones, making the contract language barely legible, leave consumers in the dark about the terms.
• Promises of elusive full interest rebates if paid in 90 days, with obstacles that prevent consumers from avoiding interest.
• Automatic payments not properly processed, leading to late payments that deprive the consumer of the interest rebate.
• Rude and unhelpful customer service and administrative errors, leading to missed payments, fees, and loss of the interest-free option.
• Harm to credit reports, including from loans paid in full or reported inaccurately. No response to consumer disputes.
• Debt collection issues, with loans sent to collectors after the interest balloons, insults even when payments errors happened while the consumer was in the hospital, and collectors failing to correct credit reports after the loan is paid.

“The Department of Defense studied high-interest loans like those issued by EasyPay Finance and TAB Bank and concluded they harmed troops and their families – and undermined military readiness,” said Nadine Chabrier, senior policy counsel at the Center for Responsible Lending. “TAB Bank and retailers, such as Meineke, should stop facilitating the sale of EasyPay loans, which inflict pain upon military communities and consumers across the country. The FDIC is responsible for supervising TAB Bank and should stop it from abusing its charter by enabling these predatory loans.”

A recent consumer alert warns of deceptive auto repair financing practices and tells consumers what steps to take if they’ve taken out an EasyPay/TAB bank loan. Military Families need to read the small print to avoid costly loans at high interest rates, and know their rights under the Military Lending Act. Those who have experienced these unreasonably high interest rates and deceptive financial lending practices should contact the Consumer Financial Protection Bureau for investigation.

The coalition is also circulating a petition to urge the FDIC to stop TAB Bank and other banks from helping nonbank lenders disguise their loans as bank loans that are exempt from state interest rate limits. The petition currently has more than 19,000 signatures.

Contact: Rachel Gittleman

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It has become increasingly common for businesses to deceptively increase the cost of goods and services through hidden or obscured fees, often presented after the consumer has committed to a transaction. The cost of junk fees almost always exceeds the cost of the service or activity that triggers them. Using well-honed techniques and marketing research, companies obscure the fee, trick the consumer into accepting it, or force them into a position where they cannot say “no.” Junk fees can also lead to perverse incentives where banks and other companies push practices that are at odds with their customers’ financial health, setting them up to fail.

“Banks, credit card companies, and other vendors impose fees on consumers in a manner that is calculated to evade the influence of competition and price comparison shopping,” said Rachel Gittleman, Financial Services Outreach Manager at the Consumer Federation of America. “The provider knows that the consumer will overlook and accept the charge because it is well hidden, or because the consumer has no alternative.”

Lower-wage workers, consumers of color, and other consumers struggling economically pay a disproportionate share of these fees. These consumers are located in communities that bear a higher fee burden on average than do predominantly white communities. Sophisticated algorithmic models may steer consumers to high-cost, subprime products instead of a wide array of competitively priced credit options with low fees.

“Junk fees like overdraft fees can push consumers into becoming unbanked and losing access to mainstream financial products,” said Lauren Saunders, Associate Director at the National Consumer Law Center.

Junk fees can also lead to discriminatory practices involving car financing, with profits padded by expensive add-on products, such as service contracts, Guaranteed Asset Protection (GAP) insurance, and window etching. These add-on products significantly increase the cost of the car, and research has shown that Latino consumers are, on average, charged higher mark-ups on auto loan add-ons than non-Latino consumers.

“Fees that don’t help consumers, and are often hidden or unreasonable, are junk fees that should be tossed out by the CFPB,” said Nadine Chabrier, Senior Policy Counsel at the Center for Responsible Lending. “Junk fees strip wealth from financially vulnerable families and disproportionately harm communities of color.”

“Junk fees are the antithesis of accumulated wealth for the most vulnerable consumers. They rob families, especially Black and brown families, of operating funds that could be used for things that actually help households run efficiently,” said Elyse Hicks, Consumer Policy Counsel at Americans for Financial Reform. “In the midst of the pandemic, communities of color paid over $4.5 billion in overdraft fees alone. Black families pay over $800 million on fees for checking account maintenance, money orders and check cashing, while Hispanic families spent $1.1 billion on those services in 2020. Junk fees make it very expensive to be poor or live on the margins.”

Eliminating junk fees advances the CFPB mission to ensure that markets for consumer financial products and services are fair, transparent, and competitive. The CFPB must rein in fees that:

• Inflate or mask the price of a product or evade disclosure requirements;
• Inhibit transparent price comparisons and competition;
• Are imposed in a manner that deceives people about the cost of a product or how it works;
• Incent practices that injure consumers in ways that are not reasonably avoidable; or
• Take unreasonable advantage of consumers.

Contact: Rachel Gittleman

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The post CFA Joined Fellow Groups in Filing a Statement for Hearing on: What’s in Your Digital Wallet? A Review of Recent Trends in Mobile Banking and Payments appeared first on Consumer Federation of America.

When Congress passed the first of the modern income-driven repayment (IDR) plans in 1992, it made a promise to borrowers that federal student loan payments would be affordable, and that even if borrowers were low-income, through eventual cancellation, their student loans would not be a lifetime burden. IDR has failed to deliver on every aspect of that promise. The groups urged the Biden Administration to restore faith in IDR through the creation of an IDR waiver.

The Biden Administration recently recognized and took steps to address similar failings in the Public Service Loan Forgiveness (PSLF) program by implementing a waiver that would allow the millions of public service workers to finally benefit from the promise of PSLF. While the groups applauded and celebrated these efforts, they urged the Administration to simultaneously address the parallel failures of the IDR program through a similar waiver.

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“We appreciate the CFPB’s careful examination of these largely unchecked BigTech Giants and hope that this inquiry signals to others operating outside of the regulatory system that they will be held accountable for any consumer harm,” said Rachel Gittleman, Financial Services Outreach Manager for Consumer Federation of America.

CFA has long documented that these companies have massive amounts of unchecked powers which has led to diminished competition, privacy violations, consumer harm, and deceptive and unfair practices. These companies have already been the focus of many regulatory and congressional investigations for harmful consumer practices, illustrating further necessity for this important inquiry. CFA is increasingly concerned that the power amassed by these tech companies is not only anticompetitive but will lead to consumer harm and further blur the line between commerce and banking.

The comments discuss the high prevalence of fraud in person-to-person payments (p2p) and calls on the CFPB to meaningfully address how consumers are protected from theft on these platforms. Additionally, the comments raise concerns that the massively amassed and unchecked power of these giants will lead to diminished consumer choice, insufficient transparency, and expansion into even more volatile products.

CFA also joined 64 groups in another comment letter to the CFPB urging the CFPB to require p2p providers to protect consumers from fraud and errors, and to work with the Federal Reserve Board to ensure protections are in place before the Fed launches its new FedNow p2p service.

Contact: Rachel Gittleman, 609-571-5953

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CFA President White has announced the formation of a Transition Committee made up of representatives of CFA’s Board, Executive Committee and staff.  “We are pleased that Jack will remain as CEO during the search for a replacement,” said White.

“During his long tenure at CFA Jack has not only been CFA’s main conduit between the organization and the media, but over the years he has led CFA’s efforts in child and product safety, indoor air quality, consumer education, auto sales practices and, most significantly, auto safety.  As a well-known consumer advocate, Gillis is author, co-author and editor of 75 consumer books including The Car Book, published for 40 consecutive years.  He served for ten years as a contributing consumer correspondent for NBC’s Today Show representing CFA, was Good Housekeeping’s personal finance columnist, and was a child product safety columnist at Child Magazine,” said White.

“Gillis’ advocacy has been responsible for major changes in the automobile industry, including significantly improved vehicle safety, better warranties, and increased fuel efficiency.  Early in his career, The New York Times featured Gillis as a leader in a new breed of consumer advocates.  He was an adjunct professor at The George Washington University, where he taught in the Graduate School of Government and Business Administration, and he currently serves on the boards of the Center for Auto Safety (chair), Advocates for Highway and Auto Safety, Center for the Study of Services (Consumers’ Checkbook) and CAPA.  Previously, he was Executive Director of the Certified Automotive Parts Association, a non-profit standard setting organization.  He received his MBA from The George Washington University where he served as a Teaching Fellow and his BA from the University of Notre Dame,” added White.

“Serving the Consumer Federation of America for all of these years has truly been an honor.  It has enabled me to work closely with some of America’s greatest consumer and safety advocates, men and women who have truly changed America for the better.  Any success that I’ve had at CFA rests squarely on the shoulders of these remarkable activists.  As it enters its 54^th year, CFA has a very exciting future ahead and I will always cherish being a small part of its distinguished history,” said Jack Gillis.

Contact: Marceline White, marceline@marylandconsumers.org

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“This important legislation is needed now more than ever as consumers across the country try to recover from the financial ruin caused by the COVID-19 pandemic,” said Rachel Gittleman, Financial Services Outreach Manager with the Consumer Federation of America (CFA). “We thank Senator Jack Reed, Senator Jeff Merkley, and Chairman Sherrod Brown for stepping up to ensure that consumers are protected from these predatory, high-cost lenders that thrive on the unaffordable debt trap created by the borrower’s inability to repay and continual reborrowing.”

This legislation, supported by 188 groups and academics representing all 50 states and the District of Columbia, extends protections that currently exist for our nation’s servicemembers through the Military Lending Act (MLA) to veterans, Gold Star Families, unactivated reservists, and all consumers.  The MLA passed in 2006 and caps the Annual Percentage Rate (APR) on loans offered to servicemembers and their families at 36 percent. The MLA has helped curb predatory lending among military members, as have rate caps in eighteen states and the District of Columbia that prevent short-term payday loans. However, the MLA fails to protect veterans or surviving family members, who have made unparalleled sacrifices for this country, and does not protect American consumers who live in states that do not have any limits on the amount of interest a lender can charge.

“Payday loans disproportionately target and harm those who have historically been excluded from mainstream financial services,” Gittleman continued. “By disproportionately locating storefronts in majority Black and Latino neighborhoods, predatory payday lenders systemically target communities of color, stripping these consumers of wealth and further exacerbating the racial wealth gap. This legislation not only protects Black, Latino and other consumers of color who have been targeted by predatory lenders, but also protects other communities, including veteran, low-income, rural, and senior citizen consumers, targeted by high cost lenders who see their historic financial exclusion as a ticket to exploitation.”

The proposed VCFCA would amend the Truth in Lending Act (TILA) to extend the MLA’s 36 percent APR cap to all consumers, covering payday, car-title and other high-cost toxic loans. This legislation will uphold stronger state protections, as 36% is a relatively high rate and only appropriate as an upper limit. A super-majority of both Republican and Democratic voters support reestablishing the traditional interest rate limits that were in effect throughout the vast majority of American history as illustrated through recent polling and every recent ballot measure held on the subject.

Problems in the repayment of payday loans and similar forms of high-cost debt rarely end with the next paycheck. Predatory loans trap families in cycles of debt with triple-digit interest rates, leading to ever-increasing loan balances that the vast majority of borrowers will struggle to repay. Instead, borrowers are forced to take on loan after loan in an attempt to pay back the loan’s original balance, now inflated with interest costs and additional fees: in fact, more than 80% of payday loans are re-borrowed within two weeks. Lender profits depend on a consistent cycle of re-borrowing. Data from the Consumer Financial Protection Bureau show that 75% of all payday loan fees come from victims who wind up taking out an average of 10 loans before they can finally pay off their debt. Many will see their cycle of debt last even longer. The repercussions are often devastating – consumers are unable to afford basic living expenses and can end up bankrupt, their property repossessed, and their bank accounts closed. Not only do these loans severely damage a family’s finances, but they result in financial pressure that can lead to anxiety, depression, and even suicide.

“We applaud Senator Jack Reed, Senator Jeff Merkley, and Chairman Sherrod Brown for their leadership in introducing this critical legislation. All consumers should be able to access safe, affordable credit without being forced into a downward spiral of high-cost debt,” said Rachel Weintraub, CFA’s Legislative Director and General Counsel.

Contact: Rachel Gittleman, 609-571-5953

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Payments on these loans have been paused since March 2020, during which time interest charges have also been suspended and the federal government has halted collection efforts against borrowers in default. The student loan payment pause has been one of the most important investments the federal government has made in Americans’ financial lives in a generation—a recognition that the inadequacies of the existing student loan safety net could not protect families in the midst of an economic and public health crisis.

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Advocates applauded the House vote and urged the President to act quickly to prevent a massive expansion of predatory lending in all 50 states.

“This vote, along with the bipartisan vote in the Senate, illustrates the widespread disapproval of the harmful rent-a-bank model that is being used by predatory payday and installment lenders to make triple-digit interest rate loans that are illegal across the country,” said Rachel Gittleman, Financial Services Outreach Manager with Consumer Federation of America. “President Biden must sign this important resolution to protect consumers, especially small business owners, still reeling from the fallout of the COVID-19 pandemic.”

Predatory small business lenders are using the fake lender rule today 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.

“Overturning the fake lender rule is an important first step to protect small businesses and families devastated by COVID from predatory lending, especially in communities of color,” Gittleman continued. “Our federal financial regulators must revisit additional rules that pave the way for usury law evasions and use their supervisory and enforcement authority to crack down on rent-a-bank lending throughout the country. In addition, Congress must pass the Veterans and Consumers Fair Credit Act, to permanently cap interest rates at 36% for all consumers” she concluded.

A broad, bipartisan cross-section of experts and officials called on Congress to repeal the fake lender rule. They include a bipartisan group of 25 state attorneys general, who are concerned that the OCC rule would effectively gut their state usury laws. The Conference of State Bank Supervisors, National Association of Consumer Credit Administrators, Military Officers Association of America, and many other groups from all 50 states and the District of Columbia also support Congress overturning the rule.

“The regulation runs counter to the widespread goal of rebuilding the economy as we emerge from the pandemic,” said Rachel Weintraub, Legislative Director and General Counsel with Consumer Federation of America. “We applaud Chairwoman Maxine Waters and Congressman Chuy García for their leadership on this issue in the House and Chairman Sherrod Brown and Senator Chris Van Hollen in the Senate and appreciate their work in overturning this harmful regulation.”

Contact: Rachel Gittleman, 609-571-5953

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