In 2013, former Supreme Court Justice Robert Jackson led the charge to pass the Fair Debt Collection Practices Act to prevent payday lenders from engaging in abusive tactics to collect debt on behalf of customers.
The legislation, signed into law in February 2014, gave banks and other creditors a right to ask for payment when consumers owe more than their property is worth.
The law has resulted in a drop in the number of payday loans issued nationwide, but there’s still a long way to go to actually end the practice.
“When we got the Fair Credit Reporting Act in 2012, we didn’t know how to enforce it,” says Jack B. Lettow, who led the Consumer Financial Protection Bureau (CFPB) in the Obama administration.
“There were some cases where payday lenders were able to get away with predatory practices, but the industry was not doing as well as it could.
We had a crisis of credibility.”
But, Letto says, “we had a lot of confidence in the consumer and in the institutions we were investigating.”
The Consumer Financial Bureau was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to oversee consumer protection.
The agency is a division of the U.S. Department of Treasury under the supervision of the Treasury Department, which has broad powers to investigate financial crimes and enforce the nation’s financial laws.
In the aftermath of the Great Recession, the CFPB was tasked with investigating financial institutions that were involved in the foreclosure of millions of Americans, including millions of people in California, Ohio, Pennsylvania, New York, Illinois, and New Jersey.
The CFPBS is also responsible for overseeing the enforcement of state and local laws regulating payday lenders.
Lately, the agency has been investigating some of the more prominent payday lenders, like Ledbetter Financial, Inc. and Ledbetter Legal Services.
Lottow says the CFOB’s investigation into Ledbetter was not intended to target any particular lender, but it was “about looking at whether or not the lenders were operating in a way that was predatory.”
The CFOBS’s investigation began in September 2013, and the CFIHS began its investigation in November 2013.
“At the time, there were no laws that specifically prohibited payday lenders charging customers more than the value of their homes,” Lettoff says.
“The problem is that most payday lenders charge higher rates, so it’s really hard for consumers to make a decision that they’re going to go out and pay those rates.”
For example, according to Lettowitz, the average payday loan at Ledbetter is between $7 and $10.
“That’s a very good rate, and it’s a rate that is usually in line with what you’re going for in a home mortgage, but that’s not what the consumers are going to get.
They’re going out and paying more for a higher rate,” he says.
In December 2014, Ledbetter filed a complaint with the CFEB that sought to get the CFSB to investigate whether Ledbetter’s practices violated the Fair and Accurate Credit Reporting act, or FAARP.
Under FAARP, banks and credit unions are required to report information about customers’ debts to the CFTB, and to disclose any allegations of non-compliance with the act.
“This was the first time that we were actually asking for a compliance investigation,” says Lettowe.
The complaint stated that “Leadbetter was violating the Fair & Accurate credit reporting act by not disclosing the information to the Bureau,” which was the CFAIR’s goal, in part.
The investigation ended up not being complete until late February, after the CFFB sent a letter to Ledbetter that contained a copy of the complaint and requested that the CBA investigate.
In response to the letter, Lottows letter stated, “We have serious concerns regarding your failure to comply with the Fair Fair & Correct Credit Reporting law.”
Ledbetter did not respond to requests for comment from MTV News.
The Consumer Finance Bureau has not yet made any recommendations about whether or how to proceed with Ledbetter.
But Lettowsky says he is optimistic.
“I think we’re making progress, and I think we are going in the right direction,” he said.
Laidlaw Law Firm In October 2016, Ledsells lawyers brought a federal lawsuit against the National Association of Home Builders, alleging that the NABB, which was created to protect home buyers and renters from predatory lenders, failed to act in compliance with the fair credit reporting law.
In March 2017, the case was dismissed.
In a letter, the NAAB wrote, “The complaint alleged that the NASB failed to report, and did not investigate, allegations of consumer fraud, breach of contract, unfair lending practices, consumer abuse, consumer misfeasance and misrepresentation, consumer fraud and deceptive acts and practices, and breach of fiduciary duty to consumers.”
“It’s been a long journey for me and my team,”