The Fight for Consumer Protections Comes to a Check Casher Near You (Updated)

(Update: Please note the corrections on the actual vote below.)
Opinion by Gregory Lobo Jost

I have to admit it is downright depressing that Republicans in Congress are doing whatever they can to block the newly formed Consumer Financial Protection Bureau (CFPB) from fully getting off the ground.  The bureau came about as a response to the failure of the various protection agencies to do their job on subprime and predatory products in the decade leading up the collapse.  Many of these agencies had arguably been bought off by the industries they were supposed to protect us from.  These same industries are now working the politicians in Washington to keep the CFPB from having any teeth.

What may actually be even more depressing is that New York State is now considering a bill that will relax some of our own strong consumer protections – mainly the state’s longstanding civil and criminal usury laws, which cap interest rates on small loans at 25%.  The Senate Committee on Banks voted yesterday in favor of a bill that would exempt check cashers from this usury cap and allow them to make triple-digit interest rate short term loans.

New Yorkers for Responsible Lending, a statewide coalition of 151 groups (including University Neighborhood Housing Program where I work) called on the committee to withdraw this piece of legislation (S.3841 / A.7047) known as the "short-term financial services loan act", as it would likely open the door to predatory payday lending, which thankfully our state has long prohibited. Despite this strong public opposition from NYRL groups and others around the state, the Committee approved the bill yesterday morning, sending it to the Finance Committee for review.

(Updated/Corrected:) Both Bronx Senators Ruben Diaz, Sr. and Gustavo Rivera are on this committee, but according to footage of the meeting on YouTube (skip ahead to minute 30 for this bill) were not present for the actual vote.  They both submitted their votes, however, with Diaz voting in favor and Rivera against. Senator Rivera was in another meeting with the Department of Corrections (he is also on the Crime Committee) about the potential closing of downstate prisons, and his staff has made it clear that he is strongly opposed to this short term loan bill as it stands. Senator Liz Krueger of Manhattan was the lone Senator to raise questions about the bill at the actual meeting, and the final vote was 14-5 in favor, with Malcolm Smith, Neil Breslin and Carl Kruger joining Senators Rivera and Krueger in dissent.  Meanwhile, Bronx Assemblyman Carl Heastie is sponsoring identical legislation in the Assembly. 

Usurious Tax-Time Loans Drained $22.5 Million from the Bronx in Just One Year

Tax refund anticipation loans (RALs) siphoned $54.7 million from the pockets of low income New Yorkers in just one year, according to a report issued last week by the Neighborhood Economic Development Advocacy Project (NEDAP), a New York City-based financial justice group (disclosure: I sit on the organization's board). More than 40% of this amount came from the pockets of Bronx residents, at an estimated cost of nearly $22.5 million.

Based on its analysis of recently-released IRS data for tax filing year 2007, NEDAP found that RALs were overwhelmingly concentrated in New York City's low- and moderate-income neighborhoods of color, especially in the West Bronx. RALs drained millions of dollars from neighborhoods throughout the Bronx, Upper Manhattan, and Central and Northeast Brooklyn.

While the number of RALs made citywide dropped between 2006 and 2007, both the number of RALs and money spent on RALs went up in the Bronx; our borough’s share of NYC dollars spent on RALs jumped from 33% to 41%.

The four top zip codes for money lost to RALs were all in the Bronx, including 10453 which was first in the City at $1.74 million. 10456, 10452 and 10457 rounded out spots two through four.  Also in the top ten citywide were zip codes 10458, 10468 and 10467, each of which saw more than $1 million going towards RALs in 2007.

RALs are high-cost loans, secured by taxpayers’ projected tax refunds and Earned Income Tax Credits (EITC). Aggressively marketed to lower income taxpayers as a way to obtain fast cash, RALs carry interest rates from 50% to 500%, according to the National Consumer Law Center and Consumer Federation of America.

Free Tax Preparation Services Offered for Bronx Residents

Neighborhood and citywide nonprofits and financial institutions are joining forces to provide free tax preparation services to Bronx residents, hoping to keep more money in our neighborhoods. Every year, Bronx neighborhoods lose millions of dollars in tax preparation fees and refund anticipation loan interest – much of this coming out of the federal Earned Income Tax Credit. Through this initiative, Bronxites making less than $72,000 will be able to file their federal and state returns without any fees.

In 2006, about one-third of all applications for Refund Anticipation Loans in New York City (more than 71,000 filers) were made by Bronx residents. The total fees paid by these filers for tax preparation, the loans themselves and any other miscellaneous fees totaled approximately $19.5 million dollars, based on calculations made by the Neighborhood Economic Development Advocacy Project using the Consumer Federation of America’s estimate of $273 for an average filer. More than 80% of these Refund Anticipation Loan applications were made by low income Bronxites, who paid more than $16 million for these services. Two-thirds of applications came from households who received the Earned Income Tax Credit, one of the largest federal anti-poverty programs.

Even at the neighborhood level, the amount of money paid for tax preparation and Refund Anticipation Loans exceeds $1 million in many northwest Bronx zip codes. For instance, more than 5,600 filers in 10453 spent more than $1.5 million on tax preparation and Refund Anticipation Loans.

By providing free tax preparation services in these same neighborhoods, much needed money will stay in the pockets of Bronxites. Services began this Saturday, January 24th at the Heiskell Enterprise Technology Center in Refuge House, 2715 Bainbridge Avenue, and run through March 28th. Services will also be offered at Mosholu Preservation Corporation, 3400 Reservoir Oval East, and Ridgewood Savings Bank, 3445 Jerome Avenue, and are by appointment only. Contact University Neighborhood Housing Program at 718-933-2539 for more information or to schedule an appointment.

Sponsored by:
• University Neighborhood Housing Program
• Fordham Bedford Children’s Services
• Fordham Bedford Housing Corporation
• Mosholu Preservation Corporation
• West Bronx Housing & Neighborhood Resource Center
• Food Bank for New York City
• ARIVA
• Ridgewood Savings Bank
• JPMorgan Chase Bank
• Signature Bank
• TD Bank

Real Help for Bronx Homeowners on the Way!

Opinion from Guest Blogger Gregory Lobo Jost
Nearly two years ago at a forum on the State of Homeownership in the Bronx, University Neighborhood Housing Program called on the City and bank partners to expand their pilot foreclosure prevention on 311 program citywide. Finally, in early 2008, thay day will arrive, and it will benefit Bronx homeowners (and their neighbors) tremendously.

Earlier this month, the Mayor, City Council and NEDAP announced the Center for NYC Neighborhoods (CNYCN), a new nonprofit entity that will "fund a major expansion and coordination of counseling and referral services, legal assistance, loan remediation, preventive outreach and education, training, research and advocacy around sub-prime lending and mortgage foreclosures."

The reason that this program offers real help for homeowners is not just that it streamlines the process onto 311, but that it provides resources for existing counseling agencies to expand their work, hire new counselors, and funds legal assistance for homeowners throughout the five boroughs. The $1 million from HPD and $1.8 million from the City Council will be the base of the organization's $5.3 million budget for its first year, with financial and philanthropic donations making up the remainder. These resources will allow counseling groups to take on more volume instead of turning people away who need the help. Instead of another hotline referring distressed homeowners to the same over-strapped groups, CNYCN will offer real assistance for New York's homeowners and neighborhoods.

For the Bronx, this assistance comes not a moment too soon. For years, the only homeowner counseling group in the Bronx had been Neighborhood Housing Services of the North Bronx, where one counselor had been responsible for foreclosure prevention for an entire borough. Recently, through a City Council earmark, the Neighborhood Initiatives Development Corporation (NIDC) took on homeowner counseling, but their counselor also can't handle the volume.

Thanks to CNYCN, more counselors will be on the way, placed at these groups and/or other organizations. In addition, UNHP's Eric Fergen will be leaving the Bronx where he has been performing outreach, intake and referrals for homeowners for the past two and a half years. A centralized system on 311 with adequate counseling resources on the back end will help fill the gap, especially for homeowners in the West Bronx where none of the counseling groups are located.

Importantly, the new center will also fund legal assistance throughout the City, including attorneys placed in the Bronx. They will help handle the volume of homeowners that were victims of predatory lending and other scams such as deed theft.

The Center for NYC Neighborhoods will hopefully put all of the pieces together quickly so that it can officially launch and operate in early 2008. Until then, Bronx homeowners can still call 311 for a referral to a counseling agency, but it could be difficult to receive assistance until the new counselors come in. If you can't get assistance from a local group, there is also a national hotline that may be able to help you (1-888-995-HOPE), although they don't provide legal assistance.

But help is on the way!