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Propublica: Newly defanged, top consumer protection agency drops investigation of high-cost lender

ProPublica, January 23, 2018: Newly defanged, top consumer protection agency drops investigation of high-cost lender

In the latest sign that the Consumer Financial Protection Bureau is pulling back from aggressive enforcement, it dropped an investigation triggered by a 2013 ProPublica story about a lender that charges triple-digit interest rates.

In 2013, ProPublica published an investigation of the subprime lender World Finance. World was charging annual interest rates that could exceed 200 percent, often trapping customers in cycles of debt by enticing them to renew the loans over and over. In states where laws barred such high rates, the installment lender loaded many loans with nearly useless insurance products that bloated the cost. The company boasted over 800,000 customers, part of an installment loan industry that claimed to loan to millions.

In the past month, Mulvaney’s influence on the CFPB has become increasingly apparent. The CFPB announced it will “reconsider” its landmark rule on payday loans, which was issued last year and aimed to prevent borrowers from getting stuck just paying the interest again and again on such loans because they could not afford to pay them off. The next day, the bureau announced it would be inviting comment on all aspects of the CFPB’s business “to suggest ways to improve outcomes for both consumers and covered entities.” It has also begun to drop enforcement actions.

And around the same time, it turns out, the CFPB also sent a letter notifying World Finance that it was dropping its investigation into the installment lender. The company disclosed the letter in a press release yesterday. Although the CFPB had not actually sued the company, it did notify World in 2015 that an enforcement action was likely, according to a company disclosure.

No area of Americans’ financial lives will be quite so affected by the CFPB’s recent turnaround as high-cost lending. Prior to the CFPB’s existence, there was virtually no federal regulation of these types of loans, which are spottily regulated at the state level. Although public opinion generally runs against allowing interest rates in the triple digits, the industry is adept at evading state rules and gaining sway with state lawmakers.

 

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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