Focus on Economic Empowerment

Keith Corbett, EVP, Center for Responsible Lending

Predatory lending in communities of color and mistakes and inefficencies in student loan servicer operations took center stage at the NAACP State Convention and Civil Rights Institute hosted by the NAACP-Aurora Branch.

In October, NAACP delegates from across the state of Colorado, Wyoming and Montana gathered to discuss emerging challenges in economic empowerment initiatives, and focused on partnerships and opportunities for change.

Keith Corbett, Executive Vice President for the Center for Responsible Lending (CRL), highlighted the work of the research and advocacy organization in raising awareness about financial pitfalls and empowering consumers to make informed decisions about complex debt instruments. He says that a key focus of his role is to eliminate abusive lending practices at the state and national levels.

“We work on helping states to start or pass legislation against actors that cause economic harm to the community,” he says.

“Our goal is to protect borrowers, many of whom live in poverty. The poor pay more for goods and services. They pay more for housing and transportation. They pay more for credit.”

CRL works to enable wealth creation in diverse communities by fighting predatory lending practices. Its focus on consumer lending underscores abusive practices in mortgages, payday loans, credit cards, bank overdrafts and auto loans.

Keith Corbett

With 21 years in the banking and insurance, Keith joined Self-Help, CRL’s parent organization and one of the nation's largest nonprofit community development lenders. Self-Help has worked to create ownership and economic opportunity in underserved communities through responsible loans and financial services.

Self-Help provides technical assistance to groups that want to create member-driven and mission-focused credit unions. In Durham, North Carolina, the nonprofit helped to start the creation of the Latino Community Credit Union, as a grassroots response to the wave of robberies that affected Latino immigrant workers.

“Many workers were keeping a lot of cash. They were getting mugged and robbed,” says Keith. “Now, Latino Community Credit Union is one the fastest growing in the country.”

Self-Help is currently working with the National Baptist Convention, USA, Inc., the largest group of African American churches in the States. With more than 8 million members and 30,000 churches, the group is interested in building a credit union to serve their constituents.

“Credit unions operate by the principles of good, responsible lending,” says Keith. “They are an important asset in ensuring economic empowerment for the communities we serve.”

Ellen Harnick, CRL’s Western Office Director, provided an overview on the dangers of predatory lending through payday loans. Payday loans are designed as debt traps that cause severe harm to borrowers. Because payday lenders have access to their borrowers’ bank accounts, borrowers who fall behind in payments end up incurring additional overdraft and nonsufficient funds fees, increased difficulty paying mortgages, rent, and other bills, loss of checking accounts, and bankruptcy.

“These loans disproportionately impact communities of color,” says Ellen. “Most payday loan borrowers are white, but payday stores are disproportionately located in communities of color.”

“Majority minority neighborhoods are the hardest hit. This is racism is overlaid with problems of poverty.”

Payday lenders make profit from exorbitant interest rates that reach as high as 300% annual percentage rate. Colorado passed a state law that caps payday loan APR at 200%.

Ellen Harnick explains how payday loans keep struggling families in an ongoing cycle of debt.

While the APR cap may represent an improvement, payday loans drain about millions per year from Colorado’s working families and seniors. Thousands of Colorado families are trapped in payday loans each year.

In 2015 alone, borrowers in Colorado paid $50 million in fees to payday lenders. On average, Colorado borrowers take out a payday loan three times a year. “This means that borrowers will stay in debt to a payday lender for most of the year," says Ellen.

The average customer pays $367.29 to borrow $394.77, paying in interest and fees almost the same amount as the principal borrowed. One in four payday loans become delinquent.

“Rates are so high, that [lenders] can afford to lend to people who can’t afford to pay,” says Ellen.

“It’s not free money when a loan goes on default, as it shows up on your credit report. It becomes harder to get a job and find a safe place to live. You pay more for any future credit.”

Payday loans are easy to get into, but hard to get out of. To protect struggling borrowers, 15 states and the District of Columbia have already passed legislation to stop payday lender operations.

“We need to help people build some wealth and keep the predatory lenders from snatching that wealth away,” says Ellen.

Stop Payday Predators is a project of the #StopTheDebtTrap campaign, powered by more than 500 civil rights, consumer, labor, faith, veterans, seniors and community organizations from all 50 states. The mission of Stop Payday Predators is to lift up the voices of the hundreds of thousands of Americans who are demanding real reform to the payday and car title loan industry.

Another issue that CRL is tackling is the growing challenge of enormous student loan debts, which now exceeds $1 trillion. The average student loan borrower graduates with nearly $30,000 in debt. The Consumer Financial Protection Bureau (CFPB) estimates that over 1in-4 borrowers are delinquent or have defaulted on their student loan debt.

Contrary to popular belief, student loan debt impacts not only young people, but older borrowers as well. From 2005 to 2015, the number of senior citizens affected by student loan debt quadrupled from 700,000 to 2.8 million. Since 2015, about 40% of older federal student loan borrowers aged 65 or older were in default.

“Many elderly adults have signed up as co-signers or primary borrowiers for loans for their children or grandchildren,” says Ezekiel Gorrocino, CRL Government and Policy Associate.

Student Loan servicers are companies that serve as the “go-between” for borrowers and creditors, says Zeke. American taxpayers pay the companies to service federal student loans via contracts with the U.S. Department of Education. Taxpayers have the right to insist that servicers do not cheat students and loan co-signers out of their rights.

Ezekiel Gorrocino discusses current efforts to hold student loan service companies accountable to borrowers.

“Servicers are supposed to be helping borrowers. They are tasked to find payment plans that work for you,” says Zeke.

But student loan servicers are not delivering on the promise to help students manage their debt. The CFPB is suing Navient for cheating and mistreating student loan borrowers. Navient holds more than 12 million student loans.

“Navient is being investigated for giving people wrong information, processing payments incorrectly, mismanaged payment programs, and overcharging consumers,” says Zeke.

Borrowers allege that Navient has routinely failed to put them into the income-based repayment plan they are entitled to by law. “Student loan services must work with borrowers to ensure they find a plan that is appropriate to their needs,” says Zeke.

To slow the rising tide of student loan default rates, 14 states have already proposed bills to regulate servicers, including overseeing their license to operate and analyzing their business practices. Some legislative solutions also have also granted the state attorney general’s office authority over servicer operations. Learn more about advocating for student loan reform,