Late last year, a bipartisan group of lawmakers introduced a joint resolution under the Congressional Review Act to override the Consumer Financial Protection Bureau’s (CFPB) federal payday rule. Since its introduction, Rep. Hollingsworth [IN-09], Rep. Banks [IN-03], and Rep. Messer [IN-06] have co-sponsored the bill.
In the Statehouse, the House narrowly passed HB 1319 to allow payday lenders to offer installment loans at up to 222 percent APR. This bill will be heard March 1st in the Senate Commerce and Technology Committee.
For nearly everything we consume, we rely on regulatory agencies to tell us what's safe and what's not. These regulations serve our needs and interests as consumers. Yet the past weeks have been rife with attempts to chip away at consumer protections on both the federal- and state-level. This is the continuation of a worrisome trend to end safeguards for vulnerable consumers.
It's been a tumultuous couple of months for tax bill writers and constituents alike. As lawmakers hurriedly drafted legislation behind closed doors, many Americans were biting their nails at the predicted impact the bill would have on their livelihoods, including possible tax hikes over the life of the Senate’s bill and cuts to vital public benefits programs in both House and Senate versions of the bill.
Those of us who support asset development for low-wealth individuals and communities know that tax reform is needed. Each year, tax incentives support wealth development through homeownership, higher education, and retirement savings – but often, the bulk of these incentives go to those who need them least. This drives wealth inequality. For shared, broader prosperity, we need to turn the tax code right-side up.
You have probably signed one. Not too long ago, I signed one while securing a car loan. "I don't want to sign this," I said, when I saw the page titled "arbitration clause" laid down in front of me. "Is this negotiable?" "No," the loan officer responded, before assuring me that it would just make any disputes quicker and easier to resolve.
This week, the Discovery Channel hosts “shark week.” As the channel educates viewers on the feeding habits of Great Whites and Hammerheads, anti-payday lending advocates will be using this opportunity to highlight the concept of loan sharking. You can follow or join the conversation using the hashtag #sharkweek and #stopthedebttrap on Twitter.
After a number of closed-door meetings, Senate Majority Leader Mitch McConnell just released a discussion draft of the American Health Care Bill.
There are a number of reasons to be concerned.
Earlier this month, Prosperity Indiana and the Indiana Institute for Working Families staff met outside the American History Museum on the National Mall in Washington, D.C. to prepare for a whirlwind round of visits to our lawmakers on Capitol Hill. On our agenda: ensure that lawmakers considered the perspectives of working Hoosiers and the agencies that stand alongside them each day, helping to make financial well-being a reality.
Now that our state lawmakers have returned home and will not return until January 2018, our eyes turn to Washington, D.C. where members of the Indiana congressional delegation will help decide the fate of a number of consumer protections.
A home. A degree or certification. The start-up costs for a small business. For families living paycheck to paycheck, these kinds of high-priced assets can feel completely unattainable, yet research suggests that these essential resources serve as buffers from economic volatility and pathways to the middle class. How do we help families secure them? For decades, matched savings accounts like Individual Development Accounts (IDAs) have been helping families make the acquisition of these assets a reality.
Today, the Consumer Financial Protection Bureau (CFPB) unveiled a proposal for a new national rule on payday lending that has the potential to save Indiana residents millions in fees if changes are made before the rule is finalized, said Kelsey Clayton, Manager of the Indiana Assets & Opportunity Network.
The Indiana A&O Network policy team worked on three pieces of legislation this session. The first, a proposal to eliminate asset limits in the Supplemental Nutrition Assistance Program (SNAP) was introduced by Senator Vaneta Becker as Senate Bill 377. Several members of The Network and the broader human services community worked in support of this bill, including Indiana Association for Community Economic Development (IACED), Indiana Institute for Working Families (IIWF), representing Indiana Community Action Association (INCAA), Indiana Association of United Ways (IAUW), and Feeding Indiana's Hungry. The unanimous bill passed its first hurdle, the Senate Family and Children's Affairs Committee, but unfortunately moved no further. It was recommitted to the Senate Appropriations Committee where it was not given a hearing.
The second item the team worked on included reforms and an expansion of Indiana's Individual Development Account (IDA) Program. Senate Bill 325, authored by Senator Mark Messmer, expands program eligibility to 200% of the Federal Poverty Guidelines and allows participants to use savings for owner occupied rehab, as well as vehicle purchase. Again, several advocates worked on this issue, including IACED, IIWF, INCAA, IAUW, as well as a local community action agency Tri-Cap, which came to the hearing to testify and share client testimonials. SB 325 enjoyed unanimous support all the way through the legislative process and has been signed by the Governor.
Last fall, the Indiana General Assembly’s Interim Study Committee on Fiscal Policy discussed the Legislative Services Agency’s most recent review (herein referred to as the Tax Review) of Indiana’s state tax incentives, including the state’s Earned Income Tax Credit. On the whole, the findings of this review were very favorable to the state’s refundable Earned Income Tax Credit, declaring that it did in fact make an (albeit in some cases small) impact on both reducing poverty and incentivizing work. But there are two steps Indiana can take to simplify the state’s EITC and make it work better for more Hoosiers.
This comes as no surprise, as the Indiana Institute for Working Families has testified before the General Assembly and its study committees many times; the Federal Earned Income Tax Credit is our nation’s most successful anti-poverty program, and the State EITC, although much smaller, is part of the EITC’s success story.
Ask Alexis, a 7 year old first grader in Wabash County, what she wants to become when she grows up and she will tell you an “eye doctor.” Alexis is not the daughter of a doctor, but rather one of five kids in a low income, single-parent household. The tremendous pressures families face today make it difficult to prepare for their children’s futures. Fortunately, communities are harnessing the power of asset building and employing children’s savings accounts (CSAs) as a fiscally and socially responsible strategy. With community support, CSAs can help kids around our state and nation—kids like Alexis—pursue their dreams.
While some may be beginning to celebrate in the continued rise of our economy, far too many Indiana residents still suffer from financial instability due in large part to subprime credit. A new report from the Corporation for Enterprise Development (CFED) reveals that 51 percent of Hoosiers have a EquiFax Risk score below 720. Our state ranks 46th in the nation for rate of bankrupt consumers.
Many of these families are not poor in the traditional sense. With the average annual pay for an Indiana worker hanging around $45,730, households that may have a decent income still fall further behind because of battered credit or lack of credit. These situations result in consumers having to engage with predatory lending practitioners. Pay day loans with an APR cap of 391% wreak havoc on Hoosier families.
Payday lending gets a bad rap, with just cause. The payday lending industry’s shady business practices are well known, ranging from usuriously high interest rates to a repayment structure that traps many borrowers in a cycle of unaffordable debt. With lax or no underwriting standards, payday lenders can make loans with minimal consideration of the borrower’s ability to repay the loan due to lenders’ preferred repayment position, often resulting in overdraft fees. Because Hoosier payday borrowers are still vulnerable to these practices despite some consumer protections, the state could better prevent debt traps with more robust truth-in-lending disclosures and capped no-fee installment plans.
The need to protect consumers from predatory loans is so strong that the Corporation for Enterprise Development (CFED) has made it a priority during its Week of Action.
Payday loans are marketed as a quick financial fix but in reality create an inescapable debt trap. Payday lenders charge excessive rates, take access to a borrower’s bank account for repayment, and make loans with no regard for a borrower’s ability to repay without refinancing or defaulting on other expense. As a result, they lead to harms such as overdraft fees, bank account closures, and bankruptcy.
The Network has identified our top three policy priorities:
Eliminate Asset Limits
The Supplemental Nutrition Assistance Program (SNAP) is the new name for The Food Stamp Program. To be eligible for SNAP, a household's monthly income must not exceed 130 percent of the poverty line or $2,177 for a three-person family in fiscal year 2015, and; a household may not exceed $2,250 in countable resources such as a bank account, or $3,250 in countable resources if at least one person is age 60 or older, or is disabled. Asset limits send a message that saving is a behavior that warrants punishment by forcing families to spend down longer-term savings in order tocontinue to receive SNAP benefits, which creates a cycle of reliance on those benefits. By eliminating the asset limit, we are better able to help families develop good savings behaviors. And it is not as if eliminating SNAP asset limits will swell the rolls. According to Indiana's Legislative Service Agency, only 0.23% of SNAP applications -897 out of 382,000 applications - were denied due to assets in excess of state limits between December 2013 and November 2014. Eliminating asset limits will reduce the administrative burden of verifying reported assets, allowing case workers to pay greater attention to other aspects of their job. States that have eliminated asset limit tests have seen improved administrative efficiency post elimination.