NCLC works to defend the rights of low-income consumers and to advance economic justice. We concentrate on working for fairness in financial services, wealth building and financial health, a stop to predatory lending and consumer fraud, and protection of basic energy and utility services for low income families. NCLC devotes special attention to vulnerable populations including immigrants, elders, homeowners, former welfare recipients, victims of domestic violence, military personnel, and others. Below is a summary of some of the issues on which we advocate on behalf of our low income clients.
ACCESS TO JUSTICE
NCLC works to preserve access to justice to enforce consumer protections. We oppose binding mandatory arbitration, class action bans, and other devices that deny consumers access to the justice system. We support the ability of individual consumers to enforce consumer protections as well as appropriate government officials and agencies.
AUTO FRAUD
NCLC combats fraud, deception, and unfair conduct in auto sales and financing. Consumers are often sold new or used cars that are “lemons” or are defrauded by dealers who do not fully disclose the car’s wreck or salvage history, prior use as a rental car, history of mechanical problems, or other defects. Auto financing is also often wrought with unfair practices. In “yo-yo” sales, for example, the consumer is told financing has been approved, pays the down payment, disposes of old car, and drives off with the new car, only to be told that there was a problem with the financing and the consumer must pay a higher rate in order to keep the car.
AUTO TITLE PAWN
NCLC opposes auto title lending, in which the car-owner pawns title to the car in exchange for cash. The effective interest rate of an auto title pawn can be astronomical (sometimes over 900% APR). If the consumer falls behind on the monthly payments the car is at risk of repossession no matter how much has already been repaid on the loan, which was often a fraction of the car’s value.
BANKRUPTCY
Bankruptcy is an important tool that helps those overburdened with debt to get a fresh financial start. Bankruptcy can stop foreclosure on a house or mobile home, prevent repossession of a car or other property, stop wage garnishment or debt collection harassment, and prevent termination of utility services. NCLC supports the right to file bankruptcy and policies to ensure that bankruptcy process works as intended to provide consumers a new beginning.
BOUNCE LOANS
NCLC opposes predatory lending in the form of overdraft protection plans by the banking industry. This relatively new form of high cost credit – which can reach a 2,000% annual rate – is often forced on consumers without their knowledge in ATM and debit card transactions approved by the bank without disclosing the huge overdraft fee for the service. Banks promote bounce loans aggressively and deceptively, using them to boost fee income at the expense of low- and moderate-consumers.
CHILD SUPPORT COLLECTION
Child support collection companies are now entering the rapidly expanding business of trying to collect more than $89 billion in past due child support owed to 17 million parents. Taking advantage of single parents struggling to make ends meet, many of these companies have launched aggressive marketing campaigns that obscure the high cost and unfavorable terms of their services. NCLC supports fairness in child support collection.
CREDIT CARDS
NCLC opposes abusive practices, exorbitant fees and rates, and unintelligible disclosures by the credit card industry. Consumers are drowning in high-rate credit card debt. Credit cards are marketed without regard to ability to pay and lure customers with deceptively low teaser or basic rates. Companies then jack rates up retroactively and impose a variety of unjustified fees on top of interest. Many creditors do not disclose the consequences of making only the minimum monthly payment, and manipulate the application of consumer payments to increase fees and rates. Credit cards should be a useful tool, not a predatory loan.
CREDIT COLLECTION AGENCIES
Well-intentioned debtors often turn to credit counseling agencies for help in paying off their debts. Instead, an unscrupulous new breed of credit counseling agencies is providing is giving improper advice, engaging in deceptive practices, charging excessive fees, and abusing their non-profit status. NCLC works to combat abusive practices by credit collection agencies.
CREDIT DISCRIMINATION
Credit discrimination is a widespread problem. Creditors often discriminate on the basis of an applicant’s race, religion, sex, marital status, familial status, sexual orientation, or disability. Locked out of the mainstream credit market, these credit applicants are forced to turn to predatory, expensive lenders who charge astronomical interest rates and high fees. NCLC opposes credit discrimination and fights for tools to combat it.
CREDIT REPORTS
Over 150 million Americans have credit files that are maintained by the major credit reporting agencies. Yet millions of these files contain outdated information and errors that can prevent consumers from receiving much-needed loans. Credit reports are also often accessed inappropriately for marketing purposes and for non-credit purposes, such as employment and insurance pricing. In addition, vulnerable consumers are targeted for scams by unscrupulous credit repair agencies that promise to erase bad credit reports. NCLC advocates reforms to ensure that credit reports are accurate and up to date, that financial data is kept private and is used only for appropriate purposes, and that consumers are protected from deceptive credit repair services.
DEBT COLLECTION ABUSE
NCLC combats abusive debt collection practices, which have consistently been the leading cause for complaints year after year to the Federal Trade Commission. Problems include abusive creditor tactics, difficulties in receiving meaningful response to disputes about a debt, the growing debt buyer industry and the sale and resale of ancient debts with little recordkeeping, and abuse of the court system. Freezing of protected Social Security and other exempt public benefits is and the growth and collection of medical debt are also growing problems. NCLC protects the rights of lower income consumers subject to debt collection.
ELECTRONIC COMMERCE
Lower income individuals are increasingly being brought into the electronic age through direct deposit of public benefits, new payment systems like prepaid debit cards and payroll cards, the transformation of paper checks into electronic debits, and other innovations. The bewildering array of new payment systems and electronic commerce can create great confusion and the potential for abuse of consumers. NCLC works to ensure that the needs of lower income consumers are kept in mind in this increasingly electronic age.
FORECLOSURE AND MORTGAGE SERVICING
Foreclosure prevention strategies are vital to sustaining homeownership for low-income families who have less savings to buffer unforeseen expenses or loss of income. NCLC advocates for counseling and foreclosure alternatives to keep people in their homes. Fairness in mortgage servicing is also essential. Today, most loans are serviced by a different company than the lender, and the compensation structure often encourages servicers to tack on unfair fees and engage in other practices that contribute to foreclosures. NCLC advocates for reforms to require loan servicers to charge reasonable fees, treat homeowners fairly, and support homeowners’ efforts to avoid foreclosure.
HOME EQUITY FRAUD
NCLC combats home improvement scams and deceptive lending practices, which are among the most frequent problems experienced by low-income homeowners. In many communities these homeowners lack access to traditional banking services and rely on finance companies and less regulated lenders. In desperate need of home repairs (e.g. roof replacement, structural reinforcements), unsophisticated homeowners fall prey to unscrupulous home improvement contractors who promise easy access to credit. Many of these loans have inflated interest rates, outrageous closing costs, and unaffordable repayment terms.
LOW INCOME HOME ENERGY ASSISTANCE PROGRAM (LIHEAP)
NCLC leads a coalition of advocates in support of the federal LIHEAP program, which is designed to assist low-income households with their energy costs. As the cost of energy outpaces increases in salaries and government benefits, more and more low-income families are unable to pay their utility bills. When the heat is turned off in the winter, or electricity turned off in the summer, the health of children, the elderly, and other household members is at risk. Unfortunately, federal LIHEAP funding lags far behind the need. NCLC pushes for adequate federal LIHEAP appropriations to help families stay current with their energy bills and avoid devastating utility disconnections. NCLC also fights for sound program design and implementation to ensure that low-income households receive the most benefit from this critical energy program.
MANUFACTURED HOMES
High real estate prices have led millions of Americans to choose manufactured homes. Yet manufactured homes can have a host of problems, including common product defects that threaten families’ well being and safety; lack of protection from exorbitant land rent increases and eviction; and fewer protections from foreclosure than for traditional real estate. NCLC supports efforts to make manufactured homes a viable and secure low cost housing option for low income families.
MILITARY PREDATORY LENDING
Predatory lenders, check cashers, high-cost car dealers, and tax preparers directly target this country’s active and retired military men and women, draining their wallets and cutting off their hopes for a comfortable financial future. Military-sounding business names, affinity marketing appeals, and promises of quick cash entice financially unsophisticated and desperate soldiers and sailors, who deserve better treatment from the country they’re serving. NCLC works to ensure fairness in lending to military families.
MORTGAGE LENDING
NCLC advocates for sustainable homeownership and against predatory mortgage lending. Predatory loans charge more in interest and fees than is required to cover the risk of lending to people with imperfect credit. They entice customers with promises of easy, no-hassle loans, and bury the true cost in the fine print, leaving unsuspecting borrowers with unmanageable debts. Mainstream financial institutions have engaged in these same tactics to push dangerous and unaffordable loans on low income families, including interest-only, negative amortization, exploding adjustable rate, and other loans made without regard to ability to pay. NCLC supports reforms to ensure that home lending leads to a stable home and wealth building, not to foreclosure and financial destruction.
MORTGAGE SERVICING
Sustainable homeownership does not depend solely on a fair loan. Today, most loans are serviced by a different company than the lender, and the compensation structure often encourages servicers to tack on unfair fees and to engage in other practices that contribute to foreclosures. NCLC advocates for reforms to require loan servicers to charge reasonable fees, to treat homeowners fairly, and to support homeowners’ efforts to avoid foreclosure.
PAYDAY LENDING
NCLC opposes payday lending, an exploitive form of short-term lending that can devastate the finances of cash-strapped consumers. In return for a loan the consumer provides the lender a post-dated check or deferred electronic access to the consumer’s account for the amount borrowed plus a fee. The effective interest rates for these payday loans can range from 300% to 1,000% or higher. Consumers are often forced into rolling over their loans when they are due, compounding the fees. Lenders also often engage in abusive collection tactics, threaten to report bad checks for prosecution, and abuse access to the consumer’s account. In addition to storefront and internet payday lender, some banks are also developing payday-like products.
REFUND ANTICIPATION LOANS
RALs often carry usurious rates from 67 to 774% APR and are marketed as instant tax refund anticipation loans, secured by the taxpayer’s anticipated refund. Precious resources are too often drained from the poor working taxpayer who is lured by confusing ads and promises of fast money. Often, these loans provide little benefit to the consumer beyond the quick refunds available for free through electronic filing. NCLC opposes abusive refund anticipation loans and works for free or lower cost alternative ways of obtaining a fast refund.
RENT-TO-OWN (RTO)
NCLC works for openness and fairness to consumers in rent-to-own transactions. RTO businesses are essentially appliance and furniture retailers which arrange lease agreements for customers who cannot buy goods with cash. Consumers who buy from rent-to-own stores often pay two to three times the cash price for their purchases. Typically these transactions do not disclose the astronomical interest rates that consumers are effectively paying or enable consumers to compare financing alternatives.
SERVICES TO THE UNBANKED AND UNDERBANKED
Financial institutions are increasingly reaching out to individuals who have been outside of or underserved by the banking industry. Banks have begun offering nontraditional services like remittances and check cashing; traditional banking services are being offered in unusual places like convenience stores; mechanisms like cell phones and prepaid debit cards are being used to provide banking services to those without bank account. NCLC monitors these developments, which offer both prospects and perils, and works for protections for lower income consumers moving into the banking system.
SOCIAL SECURITY AND OTHER EXEMPT PUBLIC BENEFITS
Social Security and Veterans benefits are exempt under federal law from debt collection. These funds are intended to provide individuals with a minimal level of subsistence. Many states have similar protection for their public benefits. Yet modern bank practices often enable these funds to be frozen or garnished. NCLC works for full protection for Social Security and other exempt funds.
STATE CONSUMER PROTECTIONS
Most states have important consumer protection laws that are often the first line of defense against unfair practices. Yet in recent years these protections have been preempted by weak or nonexistent federal laws. NCLC advocates to preserve important consumer protections at both the state and federal levels.
STUDENT LOANS
NCLC advocates for transparency and fairness in student loan lending, including both government loans and the burgeoning private student loan market. Education loans should enhance students’ financial success, not burden them with debt that far exceeds the student’s expected ability to repay. Unfair and deceptive vocational and correspondence school practices are also a tremendous source of frustration, financial damage, and lost opportunity, particularly for low-income consumers hoping to break out of poverty. Many students ruin their credit histories and are prevented from returning to school as a consequence of defaulted loans for worthless educations. Students who run into unexpected financial difficulties should also be given reasonable opportunities to obtain workouts or, like other borrowers, to discharge their debts in bankruptcy.
UTILITIES
NCLC works to ensure that low income consumers have affordable electricity, water, telephones and other utilities while at the same time ensuring that the quality of these services are not degraded in the name of affordability. We also advocate for fair and workable termination and payment plan rules from state utility commissions, and for efficiency standards for household appliances to reduce household energy bills.
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