Archive for the ‘Center for Responsible Lending’ Category

Predatory Credit Card Lending: Unsafe, Unsound for Consumers and Lenders

May 12, 2012 Comments off

Predatory Credit Card Lending: Unsafe, Unsound for Consumers and Lenders
Source: Center for Responsible Lending
From press release:

Credit card losses in the current downturn mounted faster at banks using unfair, deceptive card practices, new CRL research finds. That’s because high-cost penalty fees and interest rates were not used to mitigate risk—as credit card issuers claimed—but instead were the risk that led to higher default rates. Read the report, “Predatory Credit Card Lending: Unsafe, Unsound for Consumers and Lenders.”

In addition to showing that practices that hurt consumers also hurt credit card issuers, the study finds:

  • Bad practices are a better predictor of consumer complaints and an issuer’s losses during a downturn than an institution’s type, size or location.
  • Consumer safeguards on credit cards enhance banks’ financial health, contrary to issuers’ past claim that safeguards undermine it.
  • Credit card issuers with higher loss rates before the recession did not on average have a bigger jump in losses during the recession, indicating that having more high-risk customers did not predict which company’s problems would grow fastest.

New credit card rules have curbed or ended many of the unfair practices the study examined, such as doubling interest rates on existing balances for being a day late in making a payment. But some persist, and none of the new rules apply to business credit cards. Regulators need to better police those areas.

Government-mandated down payments would block creditworthy home buyers

March 11, 2012 Comments off

Government-mandated down payments would block creditworthy home buyers
Source: Center for Responsible Lending

As federal regulators consider setting down-payment standards on new mortgages, a new study shows such rules could push 60 percent of creditworthy borrowers into high-cost loans or out of the market altogether.

A proposal by regulators to define a high-quality mortgage as one with at least a 20 percent down payment, or possibly 10 percent, would hobble a healthy segment of the housing market. While higher down payments do result in fewer defaults, the payoff is small relative to the number of creditworthy households who could be shut out of the market, the study shows. For the full study, go to or

The results are particularly striking for African-American and Latino home buyers. A mandatory 20 percent down-payment requirement would exclude about 75 percent of African-American and 70 percent of Latino borrowers who could be successful homeowners from obtaining fairly priced mortgages.

Credit Card Clarity: CARD Act Reform Works

February 20, 2011 Comments off

Credit Card Clarity: CARD Act Reform Works
Source: Center for Responsible Lending

CRL’s study shows that the Credit CARD Act of 2009 has reversed much of the unclear pricing on credit cards, without leading to higher rates or more difficulty in getting credit.

These findings refute claims made by opponents of the credit card reforms. “People mistake higher rates on mail solicitations and other offers in the last year as a price hike,” said CRL senior researcher Josh Frank, author of the report. “But the facts show that offers now just more closely match actual costs. Prices have been level, but borrowers have a much better picture of what those prices are.”

The increased transparency documented in the report reverses a trend of increasingly unclear pricing that for years misled consumers into believing they would pay less for credit card debt than was true.

The difference between the stated rate on credit card solicitations and the rate consumers actually paid widened to unprecedented levels by 2004 and stayed at those levels through 2008. This difference narrowed markedly in the wake of CARD Act reform: Stated prices on solicitations have moved much closer to actual prices, which have remained steady.

+ Executive Summary (PDF)
+ Full Report (PDF)


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