How the Lifeline Program Can Help Vulnerable Consumers Connect to Voice and Internet Service After a Natural Disaster

How the Lifeline Program Can Help Vulnerable Consumers Connect to Voice and Internet Service after a Natural Disaster

March 2018

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The federal Lifeline program helps low-income households afford voice and broadband internet service. After Hurricane Katrina, Lifeline cell phone service helped economically fragile families displaced by natural disaster connect once again to the outside world to access disaster assistance, employers, family, and community to begin the process of rebuilding their lives. Immediately after a natural disaster, access to voice, texting, and internet service is critical to connect consumers to emergency services, shelter, and medical care. However, families with limited income who are displaced from their home or have otherwise lost access to their phone service may not have the discretionary income on hand to purchase essential voice and data service and a handset. Households that have experienced a dramatic loss of income may, for the first time, qualify for Lifeline service. The Lifeline program provides low-income households with a monthly $9.25 subsidy for voice and/or broadband service to help low-income households. This modest subsidy can go a long way.

The most popular Lifeline product is a wireless voice and data bundle that could be helpful for those who are displaced immediately following a natural disaster. It is a wireless prepaid service that does not require a deposit or good credit score and does not have a monthly bill. The monthly $9.25 covers a set allotment of voice and/or data which is currently at least 750 minutes a month and/or 1GB of data (these amounts increase each year per the Lifeline minimum standards). These wireless Lifeline providers often provide the consumer with a free handset (not covered by the federal Lifeline subsidy). If extra voice or data is needed during the month, consumers can purchase additional voice or minutes from the particular Lifeline service provider. There are also Lifeline products that are more traditional, like wired local phone service to the home, where the $9.25 is a discount off the monthly bill. The Lifeline program was recently updated to include broadband service. The marketplace for wired internet broadband to the home is in the beginning stages, so voice and wireless voice/data bundles are the most common Lifeline services.

Who Qualifies for Lifeline

There are two ways to qualify for Lifeline. The easier and quicker way to establish eligibility is by providing proof of enrollment in Medicaid, SNAP (food stamps), SSI (Supplemental Security Income), Federal Public Housing Assistance, Veterans Pension/Survivor Benefits, or certain low- income Tribal benefits (Bureau of Indian Affairs General Assistance, Tribally-Administered Temporary Assistance for Needy Families, income based Head Start or the Food Distribution Program on Indian Reservations). Applicants will need to provide documentation, such as a benefits letter or card (e.g., SNAP card). Lifeline enrollment is becoming automated so that in some circumstances the Lifeline determination can be made instantaneously by checking the qualifying program databases to confirm participation in a qualifying program. The second way to qualify for Lifeline is to submit proof that the household income is at or below 135% of the federal poverty guidelines. Finding a Lifeline Service Provider

Currently, in almost every state, consumers apply for Lifeline service through the carrier of their choice (see the companies near me tool to find a participating carrier and a description of the Lifeline service). Note that not all phone companies and broadband providers participate in the Lifeline program, only those approved by the state’s public utility commission or the Federal Communications Commission as an eligible telecommunications carrier (ETC). Lifeline households that are displaced by a natural disaster may find that they need to change Lifeline providers because they are now outside of the service area of their original provider. The Lifeline program allows consumers to change Lifeline providers for any reason. Use the company locator tool to find a new Lifeline provider. The new carrier can walk the household through the carrier change process.

What Happens When a Consumer Applies for Lifeline

When a consumer applies for Lifeline, there will be an immediate check to determine if the consumer’s household already has a Lifeline benefit. There will also be an immediate check of the consumer’s identity. The second step in the eligibility determination will be to verify that the consumer is either participating in a qualifying program or is income eligible.

Federal Lifeline program rules require that the Lifeline application collect specific information, such as the last four digits of the Social Security number. The information is required, so failure to fully complete the application will result in a denial of Lifeline benefits. The Lifeline benefit is a household benefit, so any adult in the household can be the applicant. The federal rules also require that the consumer provide specific certifications (for example, that they do not already have Lifeline service). See page 4 in the Lifeline application. This standardized Lifeline application form will be required by July 2018. Applicants will be given this form or, for a few more months, a form prepared by the company that looks very similar to the standard application form.

The Lifeline enrollment process will change over the next two years and the process will become more automated, quicker, and standardized so that it will be the same for everyone. NCLC will update this issue brief as the new National Eligibility Verifier process comes online. Consumers in Colorado, Mississippi, Montana, New Mexico, Utah, and Wyoming will be in the first wave of states migrating to the National Eligibility Verifier in 2018. In those states, to the extent possible, program eligibility will be automated and, instead of the Lifeline company making the eligibility determination, it will be the Universal Service Administrative Company (USAC) a not-for profit organization that administers the Lifeline program for the Federal Communications Commission.

Important Program Rules

Federal rules limit the Lifeline benefit to one-per-household. If the household is doubling-up with another family that has Lifeline service or in a transitional living arrangement with other households that are applying for Lifeline or have Lifeline service — common situations in natural disasters – the household will be asked to fill out an additional worksheet to demonstrate that their household is economically independent from the other Lifeline household(s) at that same address. Lifeline consumers can switch Lifeline providers at any time. Consumers do not need a special reason to change Lifeline providers. The federal program rules make it easy for consumers to shop with their feet and change providers. Companies must de-enroll Lifeline subscribers if they do not use their Lifeline service within a 30-day period as the account will be considered inactive. Consumers who lose service due to inactivity can reapply for Lifeline service through the process previously described. Lifeline recipients must annually recertify eligibility for Lifeline service, but the FCC can waive this rule for areas recovering from a natural disaster. For example, after Hurricanes Irma and Maria, a wireless Lifeline provider petitioned the FCC for a temporary rule waiver regarding annual certification to avoid having to de-enroll Lifeline subscribers at a time when the damage from the hurricanes made it difficult for Lifeline subscribers to receive or respond to messages regarding annual recertification deadlines. A similar waiver was granted after the California wildfires. The California Public Utility Commission requested a temporary waiver of the annual recertification rule and the rule requiring de-enrolling Lifeline consumers if they did not use their service within a 30-day period for the 13 counties affected by the wildfires in October and December 2017.

For more information, contact National Consumer Law Center Staff Attorney Olivia Wein at [email protected] or (202)452-6252.

Need Help with Debts?

Don’t get burned by scammers – know the facts about debt relief!

March 2018 Print in PDF

Debt relief is the generic name for different ways you can manage your bills. This fact sheet covers different types of debt relief and what you should watch out for. Debt relief scammers often target people in financial distress, such as those affected by a natural disaster. So people looking for assistance after a hurricane, flood, or fire should be especially cautious about scams.

DEBT SETTLEMENT

Companies offering debt settlement tell you to pay them instead of your creditors. They promise that if you make payments to them instead. They will settle your debts for a smaller lump sum payment once you have saved enough money in a special account.

What you should know:

Companies charge monthly fees for debt settlement plans, often for years. Debt collectors will keep calling you and may even sue you if you stop paying them. Your bills will keep growing with interest and late fees until there is a settlement (if there ever is one). If a debt settlement plan works, it can take years to complete, but many people drop out because they can’t afford it. There are no guarantees. Your creditors don’t have to agree to accept a smaller lump sum payment. and some will not even talk to debt settlement firms.

Debt settlement is unlikely to help you resolve your debts, and you may even end up owing more than when you started. DEBT CONSOLIDATION

Some companies offer to help you combine all your old bills into one new, bigger loan. They say it’s easier to make one simple payment—to them.

What you should know:

Debt consolidation doesn’t make your debt go away. It just changes who you pay. The new loan may include expensive fees. If they don’t give you a lower interest rate on the new loan, you could end up deeper in debt.

Before you sign up for debt consolidation, know your budget. Ask what the company will charge and what services it will provide. Ask for a copy of the loan agreement and take it to someone you trust before you sign.

DEBT MANAGEMENT PLANS

Debt management plans are offered by nonprofit organizations that will talk with your creditors and try to lower your interest rate, waive late fees, and arrange a single monthly payment that you make to the nonprofit. The nonprofit then distributes your money among your creditors.

What you should know:

The nonprofit charges monthly fees, often for years. Some nonprofits make a lot of money from these fees. A debt management plan takes years to complete successfully. Many people drop out because they can’t afford the payments. Ultimately you will still pay off the full amount of your bills, just with less interest and fewer penalties.

Debt management plans are not right for everyone but, if you can afford them, they’re safer than debt settlement. Ask about the fees. Ask what happens to your bills if you drop out. Make sure that the group offering the debt management plan is a nonprofit —ask if they are a “501(c)(3).” Then ask around to see if the nonprofit is trustworthy, and read any reviews with the Better Business Bureau. Consider whether you can afford the fees and monthly payments.

NONPROFIT CREDIT COUNSELING

Some nonprofit organizations will help you work out your budget and give you financial advice.

What you should know:

Nonprofits may charge a small fee for credit counseling services. Some nonprofits recommend debt management plans (discussed previously). Starting with a nonprofit credit counselor for free (or low cost) financial advice can be a great way to start working on your debt.

BANKRUPTCY

Bankruptcy is a way to eliminate or manage your debts through the courts. There are two kinds:

Chapter 7 forgives most debts and stops collection actions instantly. Most consumers get to keep the things they own, though occasionally they have to give up some things to repay creditors. Chapter 13 includes a plan to repay creditors a portion of what is owed. It takes 3 to 5 years to complete, though consumers are protected from collection during that time.

What you should know:

The court charges a filing fee and you usually need a lawyer, which can be expensive. If you do not complete a Chapter 13 bankruptcy, you will still owe what has not been paid during the case. Student loan debts are usually not forgiven in bankruptcy. Bankruptcy won’t make your home mortgage or auto loan go away if you want to keep the property, but you can use Chapter 13 to get out of default.

Bankruptcy is a good option for some people. You may want to talk to a nonprofit credit counselor first. Most bankruptcy attorneys will meet with you free the first time. Bankruptcy petition preparers (nonlawyer typing services) cannot legally represent you in a bankruptcy or give you legal advice. To find a bankruptcy lawyer, visit the National Association of Consumer Bankruptcy Attorneys website and click on “Find an Attorney” (see top toolbar) at: https://www.nacba.org.

SELF HELP

You may be able to get the help you need by talking to your creditors directly instead of hiring someone else to do this for you.

What you should know:

If you have medical debt, nonprofit hospitals are required to have financial assistance plans. Ask if your doctor has financial assistance and if you qualify. Explain why you’re having trouble paying and ask if they will accept less, waive old fees, lower your interest rate, or give you an affordable payment plan. State and federal laws protect some types of income from debt collectors. Tell your creditor if your only source of income is government benefits, such as Social Security. The creditor may voluntarily stop collections. If job loss, illness, injury, death of a family member, divorce, or other hardship prevented you from paying your debts, creditors may delay collection, accept a lower amount, or offer more affordable payment options.

Talking to creditors can be scary, but it is worth trying before considering other, more expensive options.

DEBT RELIEF ON THE INTERNET AND FROM TELEMARKETERS

Lots of places advertise that they can help you with your debts. But some of their offers are too good to be true. Instead, they might be out to take your money and leave you in deeper trouble.

What you should know:

Some ads on the internet are outright scams. Some websites offering help may not be who they say they are. Instead, some of them are a type of business called a “lead generator.” Lead generators collect your information and sell it to other companies—so you don’t know who will end up with it, whether they’re trustworthy, or what they’re really offering. They make money off you but don’t give you anything in return. It’s OK to search for help on the Internet, but be careful. If you find an organization you like, check them out before you sign up. Search for complaints. Ask to see their contract and promises on paper before you sign anything. And never give anyone your bank account number, credit card number, or social security number unless you’re 100% sure it’s safe.

Follow the same precautions with telemarketers who offer debt relief. Many debt relief scams rely primarily on telemarketing to draw people in.

STUDENT LOAN DEBT RELIEF

Some companies promise to lower your student loan payments or enroll you in a forgiveness program. These companies promise that if you sign up with them, they can help you solve your student loan problems. These companies use a one-size fits all approach and often charge exorbitant amounts of money for programs that federal student loan borrowers can already access for free.

What you should know:

Many of the programs promised are already available to federal borrowers for free from the U.S. Department of Education. Learn more at: https://studentaid.ed.gov. Federal student loan borrowers can find out who to contact about their student loans through the U.S. Department of Education at: https://nsldsfap.ed.gov/nslds_FAP/. Many debt relief companies have you send your monthly loan payments to them. They then keep a portion of the payment for themselves. Some scammers use a government seal, your school, or your loan balance to make you think they are legitimate. The U.S. Department of Education’s Office of Federal Student Aid offers tips to avoid scams at: https://studentaid.ed.gov/sa/repay-loans/avoiding-loan-scams

Sometimes people need help dealing with their student loans. Borrowers looking to lower their monthly payments should contact their servicers. Borrowers in default may benefit from legal assistance to find out how to get back on track. Borrowers can find referrals for legal assistance at: http://www.studentloanborrowerassistance.org/resources/referral-resource/legal-resources

ADDITIONAL RESOURCE

NCLC’s Guide to Surviving Debt Precise, practical, and hard-hitting advice from the nation’s consumer law experts on how to manage financial difficulty.

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Federal Reverse Mortgage Program Results in Widows Losing Their Homes After Death of Spouse

March 12, 2018

New information from the U.S. Department of Housing and Urban Development demonstrates that widows and widowers are being kicked to the curb after the death of a spouse, due to insufficient guidelines, servicer discretion, and uneven implementation of a program that was supposed to keep widowed Non-Borrowing Spouses in their homes. Better guidelines are needed to make this program accessible to all Non-Borrowing Spouses and enable them to remain in their homes.

The California Reinvestment Coalition and Jacksonville Area Legal Aid have released the latest response by the U.S. Department of Housing and Urban Development to a Freedom of Information Act (FOIA) request filed by the two organizations in order to help the public better understand the extent of foreclosures under the federal Home Equity Conversion Mortgage (HECM) reverse mortgage program, as well as the efficacy of a new program meant to keep widowed Non-Borrowing Spouses in their homes after the death of their loved ones.

“We can all agree that we should do everything we can to keep widowed seniors in their homes and to prevent all unnecessary foreclosures,” said Kevin Stein of the California Reinvestment Coalition. “It is not acceptable that any senior should fall through the cracks into homelessness due to inadequate public policy. We must fix this problem.”

“One can think of few things more heart wrenching than the passing of a long-time companion other than to learn that this very emotional event is the very trigger for your loss of your home, memories and all,” said Lynn Drysdale of Jacksonville Area Legal Aid.

The FOIA response from HUD indicates that fewer than 600 widows or widowers (referred to as Non-Borrowing Spouses) sought assistance under the program, though it was believed that many more would need this kind of assistance (the Washington Post noted there may be an estimated 12,000 Non-Borrowing Spouses). And of these few widowed seniors who sought help, over 22% were denied. Out of 591 applicants who sought help, only 317 received it. 132 widowed seniors were denied assistance, and another 142 have pending requests.

HUD listed the top three reasons for denying widowed seniors’ requests for assistance:

1. The request for assistance was submitted more than 120 days from the borrower’s date of death.

2. The Loan Balance and Net Principal Limit did not meet FHA’s tolerance levels.

3. Deficient Documentation.

Each of these reasons are based on policies that are arbitrary, unnecessary, burdensome, or based on factors outside the spouse’s control.

The 120 day application deadline is too restrictive for elderly borrowers attempting to handle burial, probate, and other affairs after the death of a spouse. Due to insufficient outreach, many do not learn about the program until that deadline has passed.

Loan balance limits are arbitrary, since the spouse has no control over, and no knowledge of, HUD’s loan limits. Loan balance limits are not even listed as an eligibility criteria in HUD’s guidance.

Non-Borrowing Spouses have every incentive to provide the necessary documentation so they can remain in their homes; burdensome requirements and unclear communication from servicers cause these documentation-related denials.

“HUD should immediately send a Notice Letter to all Borrowers and Non-Borrowing Spouses, in plain language, listing all requirements for the Non-Borrowing Spouse to remain in their home for life,” said Sandy Jolley, Executive Director of CAARMA. “That way when the Borrower dies the Non- Borrower will have a complete package prepared for the lender to approve the application and HUD to accept assignment of the loan for the remainder of the Non-Borrowing Spouse’s life.”

The response comes as the Administration’s budget proposal acknowledges the issue of foreclosures on Non-Borrowing Spouses. And yet, Congress is poised to further mask trends in reverse mortgage lending. The Bank Lobbyist Act – otherwise known as S. 1255, the Economic Growth, Regulatory Relief, and Consumer Protection Act – would exempt up to 85% of bank lenders from new Home Mortgage Disclosure Act (HMDA) home loan reporting requirements which would have for the first time included reporting on whether loans are reverse mortgages and whether borrowers are seniors.

The FOIA response also comes as reverse mortgages are making headlines. An Inside the CFPB analysis found that while mortgage complaints by seniors were generally down, older borrowers were having more issues with reverse mortgages than in the past.

To protect innocent widows and widowers from unnecessary foreclosures, advocates urge:

HUD should mandate that servicers contact all households where a spouse is not on the HECM loan, and inform them that Non-Borrowing Spouses are at risk of losing the home after the borrower passes away unless action is taken, that there is a process for Non-Borrowing Spouses to remain in their homes, and that the safest way to protect themselves is to add the spouse on title to the property. HUD should also provide a phone number for such households to call with questions and receive information.

Where a borrower passes away, HUD should clearly require all servicers to reach out to the surviving spouse to explain their rights to remain in the home, and to help them complete necessary documentation. HUD should do away with the 120 day limit, which seems designed to frustrate the ability of widows and widowers to remain in their homes.

Servicers must adopt notices that are easy to read and understand, and which explain the rights and responsibilities of surviving spouses. Servicers should provide a single point of contact to assist widowed seniors seeking to stay in their homes.

Congress should pass H.R. 4160, the Preventing Foreclosures on Seniors Act, introduced by Rep. Maxine Waters, which would improve outcomes by taking away servicer discretion to offer, or not offer, widowed homeowners assistance to stay in the home.

“Low-participation in the surviving spouse program, and the foreclosure rate in general, reflects out- of-touch policies and procedures,” said Alys Cohen of the National Consumer Law Center. “HUD must revise its rules to align them with the goals of the program and the directive of the court, to help older homeowners age in place, even when they have faced the tragic loss of a spouse.”

Advocates agree that HUD must act in order to keep widows and widowers in their homes. All eligible borrowers should be told about this program, informed of their rights, and approved for assistance if they qualify. No one should be forced out of their own home because they are not listed on a loan document, especially in light of abundant anecdotal reports of problematic sales practices where brokers encouraged younger spouses to remain off of the loan and deed.

“The Center for NYC Neighborhoods has seen a dramatic increase in reverse mortgage foreclosures throughout New York State in recent years. It is deeply concerning how few widows are able to take advantage of protections intended to allow them to stay in their home. These surviving spouses deserve extra protection from homelessness during what is already an immensely difficult period of their lives, which is why we support strengthening outreach to surviving spouses and expanding protections available to them,” said Caroline Nagy, Deputy Director for Policy and Research at the Center for NYC Neighborhoods.

CRC and JALA previously reported on an initial FOIA response in November 2017, which highlighted a 646% increase in foreclosures against seniors with these federally insured reverse mortgages in 2016, as compared to the previous seven years. At the time, CRC, JALA and other advocates made a number of recommendations, but have yet to see those recommendations implemented effectively.

Consumer Advocates Urge House Members to Halt Bank Payday Loan Legislation in Committee Markup

FOR IMMEDIATE RELEASE: March 21, 2018 || Contacts: Jan Kruse (National Consumer Law Center): [email protected]; Ricardo Quinto (Center for Responsible Lending):ricardo.quintoresponsiblelending.org; Carter Dougherty (Americans for Financial Reform): carterourfinancialsecurity.org

H.R. 4861 would invite banks back into the business of making harmful 200-300% interest rate loans

WASHINGTON, D.C. – Today in a committee markup meeting scheduled for 10:30 a.m. ET, the Committee on Financial Services is scheduled to begin considering a bill aimed at weakening consumer protections for Americans and opening the floodgate for abusive predatory lending practices. H.R. 4861, the so-called “Ensuring Quality Unbiased Access to Loans” (EQUAL) Act, authored by Congressman Trey Hollingsworth (R-Ind.), will promote harmful predatory lending.

The bill would make it easier for banks to get back into the business of making 200-300% interest payday loans that trap distressed customers in a cycle of debt: It would rescind the Federal Deposit Insurance Corporation’s (FDIC) 2013 guidance addressing bank payday (“deposit advance”) loans; exempt banks and credit unions from the Consumer Financial Protection Bureau’s (CFPB) final payday lending rule that stops repeated short-term high cost loans that drain consumers’ finances; require bank regulators to write rules for bank loans without sufficient consumer protection standards; and preempt state laws covering bank and credit union small dollar loans, including by state-chartered institutions.

The Stop The Debt Trap campaign, a coalition of over 750 organizations across the country, recently sent a letter to the House Financial Services Committee urging members to vote against H.R 4861 and halt this legislation from moving forward.

“Congress should encourage banks to make affordable small dollar loans, instead of debt trap bank payday loans at 300% interest,” said National Consumer Law Center Associate Director Lauren Saunders.

“Payday lending by any lender—including banks—is an abusive form of loan sharking, rooted in trapping borrowers in unaffordable, high-interest rate loans,” said Scott Astrada, Federal Advocacy Director at the Center for Responsible Lending. “Unable to afford both the loan and the interest, and with a continued need to meet essential expenses, borrowers are forced to reborrow again and again, taking out one unaffordable payday loan after another. Often, the financial consequences of the debt trap don’t stop there, but extend to bank penalty fees, greater delinquencies on other bills, ruined credit, loss of checking accounts and even bankruptcy. We can’t afford to have Members of Congress push this payday lending bill forward, especially in a time when bad actors in the industry are pushing a deregulation agenda that aims to trap consumers in debt.”

“Against the clear wishes of Hoosiers, Rep. Hollingsworth is trying to turn off the lights out on all enforcement authorities so that predatory loans can be made without any ground rules,” said José Alcoff, Payday Campaign Manager at Americans for Financial Reform. “In a poll commissioned by Prosperity Indiana and the Indiana Institute for Working Families earlier this year, 88% of Hoosiers were in favor of a state 36% interest rate cap, and 78% of Hoosiers said they would support ensuring borrowers have an ability to repay loans before they’re made, which is the basis of the Consumer Bureau’s new borrower protections. Rep. Hollingsworth’s bill would blow past these protections so that banks and payday lenders can scam the public with no one to stop them when they break the law.”

“Payday loans are a defective and harmful product with unreasonable interest rates. This bill panders to the greed of a few of disreputable bankers while ignoring the needs of millions of struggling families,” said Christopher L. Peterson, Senior Fellow at Consumer Federation of America.

The effect of H.R. 4861 is to permit banks to make short-term balloon payment payday loans. The FDIC’s 2013 guidance, which the bill rescinds, targeted the high-cost, unaffordable short-term balloon payment “deposit advance” loans that banks were making at that time. The CFPB final payday loan rule, from which this bill would exempt banks and credit unions, establishes ability-to- repay requirements only for loans 45 days or less. So this bill is not about encouraging banks to make affordable installment loans. It will permit them to make unaffordable balloon-payment payday loans again.

Background on Bank Payday Loans

In 2013, a handful of banks were making high-cost payday “deposit advance” loans, structured just like loans made by non-bank payday lenders. The bank repaid itself the loan in full directly from the borrower’s next incoming direct deposit, typically wages or Social Security, along with annual interest averaging 225% to 300%. The data on these loans made clear that, despite banks’ claims that the loans were a short-term solution to a temporary shortfall, repeat loans were typical. The CFPB’s analysis of thousands of bank payday loans found a median number of advances per borrower of 14, with extremely high numbers of advances for many borrowers: Fourteen percent of borrowers had a median of 38 advances in 12 months. Bank payday loans created this debt trap despite so-called protections the banks touted.

At their peak, these loans—even with only six banks making them—drained roughly half a billion dollars from bank customers annually.

This cost does not include the severe broader harm that the payday loan debt trap has been shown to cause, including increased difficulty paying mortgages, rent, and other bills, loss of checking accounts, and bankruptcy. Payday lending has a particularly adverse impact on African Americans and Latinos. A disproportionate share of payday borrowers come from communities of color, and these loans cause people to lose their checking accounts and push them out of the banking mainstream.

Bank Payday Loans Were Met with Broad Public Outcry and Eventually Regulatory Intervention

Payday lending by banks was met by fierce opposition from virtually every sphere—the military community, community organizations, civil rights leaders, faith leaders, socially responsible investors, state legislators, and members of Congress.

Recognizing the harm to consumers, regulators took action in 2013 to protect bank customers—the OCC and FDIC with their 2013 deposit advance guidance requiring an income-and-expense-based ability-to-repay determination, and the Federal Reserve with its supervisory statement, emphasizing the “significant consumer risks” bank payday lending poses. For the most part, the banks responded by suspending their payday loan products. But under a new Acting Comptroller, the OCC rescinded its guidance in October 2017, which the agency claimed was warranted in part because the CFPB had just issued a final payday loan rule.

The CFPB’s Rule Already Limits the Impact on Banks & CUs, as Widely Acknowledged by the Industry.

There is no need for legislative exemption of banks and credit unions from the CFPB final rule because the rule already minimizes its impact on bank and credit union products. Between the proposed and final rule, CFPB added exemptions for loans that mirror “payday alternative loans” made under the National Credit Union Administration’s regulations, and for “accommodation” loans by lenders such as community banks whose short-term loans don’t exceed 2,500 loans and more than 10% of the lender’s revenue in a year. Bank and credit union trade associations were generally positive toward the final rule as a result. Ball is Now in FCC Chairman Pai’s Court to Protect Consumers from Robocalls

FOR IMMEDIATE RELEASE: MARCH 16, 2018 || CONTACTS: Margot Saunders ([email protected] or (202) 595-7844); Jan Kruse ([email protected] or (617) 542-8010); Consumers Union: Kara Kelber ([email protected] or (202) 462-6262); Consumer Federation of America: Susan Grant ([email protected])

Long-awaited Court Decision Rolls Back Protections for Consumers from Invasive, Illegal Robocalls

Washington – The D.C. Circuit Court of Appeals bounced back a 2015 Order from the Federal Communications Commission (FCC) interpreting the Telephone Consumer Protection Act’s (TCPA) consumer protections against unwanted robocalls. Disappointingly, the court order unwound key protections that the previous FCC had imposed against unwanted calls to cell phones that plague consumers.

Specifically, the court sent the issue of how the equipment known as “autodialers” is defined under the TCPA back to the FCC. It is now up to the Commission to find a way to define the technology so that it covers the majority of robocalls being made to American consumers. The court’s order leaves sufficient room for the FCC to ensure that equipment that dials “dial thousands of numbers in a short period of time” is considered an autodialer under the TCPA. Calls made to a cell phone using an autodialer require a consumer’s consent to be legal under the TCPA. If the definition is not sufficiently expansive, billions of calls now plaguing consumers will not be covered by the TCPA—leaving consumers with no ability to stop the calls.

“We call upon the FCC to recognize that the TCPA is an essential shield for consumers to protect themselves from the scourge of unwanted automated calls,” said Margot Saunders, senior counsel at the National Consumer Law Center. “Chairman Pai understands that robocalls are a big problem and he has proposed several initiatives, such as a reassigned number database, to help stop them. But now all eyes will be on him to see if he will maintain the viability of the only law that allows consumers to protect themselves against uninvited and illegal calls.”

“What the DC Court of Appeals decision really means is that consumers, already inundated by robocalls, will be hit with even more unwanted calls,” said Maureen Mahoney, policy analyst for Consumers Union, the advocacy division of Consumer Reports. “We believe that the FCC acted within its authority when it passed the rules in 2015 to provide necessary consumer protections for a growing problem. Consumers should have the right to control the calls that they receive and they deserve the strongest possible protections. Chairman Pai has said that he’s committed to fighting robocalls, so the FCC needs to follow through on those promises and ensure that consumers aren’t the losers in this decision.”

The court order also invalidated the 2015 order’s clear prohibition against calls to a telephone number that was reassigned from one person who provided consent to another who had not provided consent. The court held that the FCC had created an arbitrary exception to this prohibition – an exception for the first call to the reassigned number. The court did not, however, disagree that the FCC has the authority to interpret the TCPA to prohibit calls to reassigned numbers without the consent of the called party. The FCC is likely to revisit this issue.

The order did uphold the right of consumers to revoke consent to receive robocalls by “any reasonable means,” which provides a slim victory for consumers. “However, it will be up to the FCC to ensure that consumers can always stop these calls by revoking consent,” added Susan Grant, Director of Consumer Protection and Privacy at Consumer Federation of America.

Affirmative Litigation of Criminal Justice Debt Abuses – Theory and Practice

March 16, 2018

Lawsuits are currently challenging harsh criminal justice debt collection practices, including “debtors prisons” and automatic license suspensions. This webinar discussed litigation strategies and challenges when pursuing affirmative claims against harsh criminal justice debt collection practices, and will encourage participants to incorporate consumer and constitutional law insights in their work.

Presenters: Claudia Wilner, National Center for Law and Economic Justice; Premal Dharia, Civil Rights Corps; Nusrat Choudhury, ACLU; Sara Zampierin, Southern Poverty Law Center Moderator: Abby Shafroth, Attorney, National Consumer Law Center

New Report Lifts Voices of Borrowers Trapped in Poverty by Draconian Student Loan Collection Tactic

FOR IMMEDIATE RELEASE: MARCH 15, 2018 || Contacts: Persis Yu ([email protected]) or Jan Kruse ([email protected]); (617) 542-8010

National Consumer Law Center Report: EITC Seizures Harm Working Poor

Boston – Today, the National Consumer Law Center (NCLC) released Voices of Despair: Student Borrowers Trapped in Poverty When Government Seizes Their Earned Income Tax Credit. The report compiles stories from borrowers recounting the hardship caused by the federal government’s seizure of their Earned Income Tax Credits (EITC) because of a defaulted student loan.

In January 2018, NCLC asked student loan borrowers who had their EITC seized to share their stories and to tell us what they had planned to do with their tax credit. Many borrowers described the things their growing children would have to do without—clothing for the next season, a bed to sleep in, medical care, a roof over their heads, and in some cases, food in their bellies.

“The loss to these families is heartbreaking,” said Persis Yu, National Consumer Law Center attorney, director of NCLC’s Student Loan Borrower Assistance Project, and author of the report. “The Earned Income Tax Credit keeps parents working and children out of poverty. Robbing families of these funds is counterproductive and makes absolutely no sense.”

The nonpartisan Center on Budget and Policy Priorities (CBPP) has cited EITC expansion as the most important cause of employment growth among single mothers with children during the 1990s. In 2015 alone, the program was credited with lifting about 6.6 million people out of poverty, including about 3.3 million children.

Taking the EITC also compounds the harms borne by low-income borrowers, who often were denied the promised benefits of education. For example, many students were lured in to attend a school such as Everest (part of the for-profit Corinthian Colleges) which the U.S. Department of Education found misrepresented job placement rates to their prospective students, or a school that closed in mid-course which recently happened to many students attending the for-profit ITT Technical Institute.

“Stripping families of the Earned Income Tax Credit is a morally bankrupt policy which compounds the harms borne by low-income borrowers,” said Yu. “Congress needs to put a hard stop to this federal government practice.”

Senate Votes to Roll Back Protections against Reckless Practices that Triggered Great Recession

FOR IMMEDIATE RELEASE: MARCH 14, 2018 || Contacts: Alys Cohen ([email protected]) or (202) 595-7852 or Jan Kruse ([email protected]) or (617) 542-8010

Bill Allows Mortgage Lenders to Resume Risky Loans, Weakens Protections against Racial Discrimination and Rural Lending Abuses

Washington – Today, the U.S. Senate passed S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, which strips consumers of key protections Congress enacted after the recent financial crisis that devastated communities and crashed the market. The bill rolls back a range of housing protections, leaving homeowners more exposed to lending abuses.

“In the guise of relief for small banks, the Senate bill will hide information on racial discrimination in home lending, loosen protections against volatile adjustable interest rate loans, and expose manufactured home borrowers to overpriced loans,” said Alys Cohen, staff attorney in the Washington office of the National Consumer Law Center. “At a time when interest rates are rising and bank regulators are pulling back from protecting the public, Congress should be ensuring that consumers can get a fair deal, not opening loopholes for reckless lenders.”

S. 2155 will enable home lending abuses such as:

Engaging in racial discrimination in mortgage lending without reporting key loan characteristics to regulators for oversight; Offering risky adjustable rate mortgages without proper affordability reviews; Steering manufactured home borrowers into overpriced loans; Making higher priced mortgage loans to borrowers without an escrow account to shield against payment shock at tax time; and Lending in rural areas without a reasonable property valuation.

The bill contains some modest protections related to credit reporting, such as free credit freezes, but preempts state freeze laws that apply to insurance and employment usage and prevents states from adopting stronger measures. The bill also forces Fannie Mae and Freddie Mac to start over on a process to update their credit scoring models, wasting years of work and delaying an already overdue effort. This provision is seen as a boon to VantageScore, which is a joint venture of the credit bureaus, including Equifax.

S. 2155 also purports to help student loan borrowers “rehabilitate” their private student loans. But in fact, it would allow collectors to use unspecified credit benefits as bait to lure unwitting borrowers into reviving ancient uncollectable debts.

The bill would also increase systemic risk to the entire economy by deregulating 25 of the 38 largeest banks in the United States. “Can memories in Congress be this short that we want to again risk devastation for millions of American families?” Cohen asked.

The bill now advances to the U.S. House of Representatives.

U.S. Department of Education’s Plan to Protect Servicers and Debt Collectors that Lie to Borrowers

FOR IMMEDIATE RELEASE: MARCH 9, 2018 || Contacts: Persis Yu ([email protected]) or Jan Kruse ([email protected]); (617) 542-8010

Boston – The U.S. Department of Education’s announcement that federal law preempts state efforts to stop unfair and deceptive actions by federal student loan servicers is merely a flawed attempt to shield servicers and debt collectors from the consequences of their illegal actions, according to advocates at the National Consumer Law Center.

“The Education Department’s purported guidance is contrary to recent court decisions in Massachusetts and Washington and is an outrageous effort to protect unfair and deceptive actions by student loan servicers and to deprive borrowers of their right to prompt, accurate, and timely service on their student loans,” said Persis Yu, staff attorney and director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. “Servicers and collectors who mistreat student loan borrowers and steer them into inappropriate payment plans should not be above the law,” she added.

The Department’s guidance (see page 16) states that “State servicing laws [that] attempt to impose new prohibitions on misrepresentation or the omission of material information … run afoul” of federal law. “The idea that stopping misrepresentations conflicts with federal law or is too costly to taxpayers should be taken as a slap in the face to the 43 million taxpayers who also owe federal student loan debt,” Yu stated.

It is well established that the Higher Education Act does not “preempt the field”—in other words, it does not override state laws that provide additional protection to student loan borrowers, as long as those laws do not actually conflict with federal law. The Conference of State Bank Supervisors wrote in a letter to Education Secretary Betsy DeVos that the effort to override state protections “runs counter to the Congressionally mandated state federal balance in financial regulation and exceeds the Department’s authority.”

“States have a critical role to play in protecting student loan borrowers. With the Education Department inappropriately siding with servicers over borrowers, the role of states is now more critical than ever,” Yu said.