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New protections for payday loan borrowers are coming (if Congress will stay out of the way)

After years of research and public consultation, the Consumer Financial Protection Bureau this month issued a final rule to create new protections for payday loan borrowers. These new protections are a necessary and positive first step in eliminating the debt trap that so often results from high-interest, predatory loans — and nowhere more than Oklahoma, where we have the highest payday loan usage rate in the nation.

The new protections won’t close off all access to expensive loans, but they will curb the practices most likely to catch borrowers in debt traps, with mounting fees and interest charges on loans they simply cannot afford to pay back.

But we’re not out of the woods quite yet.  This new rule could face strong opposition from the predatory loan industry and from Congress, and we must continue speaking out to ensure that these protections go into effect.

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Highs and lows of Oklahoma’s 2017 legislative session (Part 2)

Yesterday we shared a recap of what happened this legislative session with the state budget, taxes, and education policies. Today in part two, we’ll look at outcomes related to health care, criminal justice, and economic opportunity.

We began the session with a set of top priorities in all of these policy areas. We made progress on some of our issues and were disappointed by others, but we were also heartened by the large number of Oklahomans who got involved this year, many for the first time, to advocate for a better future. That advocacy was key to stopping some big threats to health care and the safety net this year, though several positive reforms fell short as well.

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Bill to expand eligibility for Oklahoma’s Promise scholarships would be a win for all Oklahomans

The Oklahoma Legislature is close to passing a bill (SB 529) to make Oklahoma’s Promise scholarships available to more students. Available since 1996, these scholarships cover the cost of tuition for in-state students at an Oklahoma public college or university if students complete a series of college-readiness requirements before high school graduation and maintain a passing GPA once in college.

Oklahoma’s Promise scholarships have become a critical part of college planning for low and moderate income Oklahoma families as they are guaranteed to students who meet the income guidelines and complete the requirements.  Expanding access to the program is necessary if Oklahoma wants to compete in the new economy where most high-paying jobs require advanced education.

Currently, students are eligible for the scholarship if their family’s income is below $50,000 at the time they apply.  SB 529 would raise the income limit to $55,000 in 2017-2018 and then to $60,000 in 2021-2022.  SB 529 has passed both the House and Senate, but the Senate still needs to approve House amendments or work out the language in conference committee. The bill is close to the finish line, which is good news for college-bound students and for the whole state.

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Statement: We thank Gov. Fallin for vetoing expansion of predatory lending

by | May 5th, 2017 | Posted in Financial Security | Comments (6)

Oklahoma Policy Institute released the following statement in response to Governor Mary Fallin’s veto of HB 1913, a bill that would have allowed a new form of very high-cost lending:

By vetoing HB 1913, Governor Fallin has prevented the expansion of predatory lending practices that would trap more Oklahomans in costly debt. We thank Governor Fallin for listening to the seniors, religious leaders, consumer watchdogs, and numerous other Oklahomans who spoke out against this bill. Despite an aggressive lobbying push by the high-cost lending industry, regular Oklahomans won out.

In the debate over HB 1913, many lawmakers recognized that we need to better regulate payday lending practices to stop the abuse of financially struggling Oklahomans. Next year, lawmakers should prioritize limiting excessive interest rates and providing greater consumer protections for these loans.

Statement: HB 1913 creates unnecessary, abusive loans; Gov. Fallin should veto

Oklahoma Policy Institute released the following statement in response to the Legislature’s passage of HB 1913:

It is very disappointing that the Legislature has approved HB 1913. This bill was ​drafted ​and lobbied aggressively by the payday loan industry​. By creating another predatory, high-cost loan product, this bill ​will ​put more ​Oklahomans​ in deep​ financial distress.

Oklahomans already have plenty of options for short-term credit and do not need the harmful loan products allowed by HB 1913. The loans authorized by HB 1913 with annual interest rates of over 200 percent would be more than twice as expensive as the signature loans that are already widely available. HB 1913 would also allow abusive practices like taking automatic withdrawals from a borrower’s bank account, forcing employers to send portions of wages to a lender, and putting liens on a borrower’s car for loans as small as $100.

Governor Fallin previously showed her concern about legislation that takes advantage of financially vulnerable Oklahomans when she vetoed a 2013 bill that would have raised fees on small loans. We hope that the Governor will again stand up for Oklahomans by vetoing HB 1913.

Please contact Governor Mary Fallin to express your opposition to HB 1913 and ask her to veto the bill. You can call her office at (405) 521-2342. You can also contact her via twitter @GovMaryFallin.

Click here to learn more about this bill and find out how your legislators voted.

What happened to my refund?

It’s tax time again, and if you are one of the more than 300,000 Oklahoma households that claim the state Earned Income Tax Credit (EITC) you may have noticed that your tax refund is lower than it was last year, even if there was no change in your income. That’s because the Oklahoma Legislature slashed the state EITC to help close last year’s budget hole. The state EITC is no longer refundable in Oklahoma, so most people who qualify for the credit will no longer get the full benefit.

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“Small loan” bill would mean big debts for Oklahoma families

For many Oklahomans in a financial trouble, payday loans can seem like a quick and easy fix. Borrowers can take out a payday loan for up to $500, secured by a post-dated check, usually for a period of 12 to 14 days. Under Oklahoma’s deferred deposit lending act, payday lenders can charge $45 in fees for a $300 loan, which amounts to an APR (annual percentage rate) of 391 percent.

While some borrowers turn to payday loans for an emergency car repair or other one-time needs, the industry’s successful business model is built on repeated borrowing by customers facing chronic financial difficulties. Data from Oklahoma’s payday loan database revealed that a majority of all loans went to borrowers who took out twelve or more loans over the course of a year — or an average of more than one loan a month.1 Fifty-three percent of all borrowers took out seven or more loans in a year, compared to just 28 percent who took out three loans or less. The average customer who comes up chronically short of being able to pay their monthly bills paid $324 in fees to payday lenders in 2014.

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In Oklahoma, avoiding credit card debt can hike your insurance premiums

by | November 17th, 2016 | Posted in Financial Security | Comments (2)

On October 18 at the Oklahoma Capitol, Stillwater resident Jack Bays spoke to a conference room filled with legislators, lobbyists, and insurance professionals. It was his first time in front of a legislative committee, and quite possibly his first time in the Capitol, but he spoke with confidence as he proudly declared his status as a Vietnam veteran. Mr. Bays told the crowd that he was not a man in a suit, paid to be in the room to push an agenda. He said he was at the podium as a last resort. He described seeing his auto insurance rate increase every year even though his driving record remained clean. For a long time he didn’t know why, until he discovered that insurance companies were hiking his rates due to his credit score — which was low because he had no credit cards and no debt.

At this interim study, the Oklahoma Legislature took the first step in addressing this issue. Legislators heard testimony from Jack Bays as well as experts in the insurance industry and leading advocates for consumer protection. Chuck Bell from Consumers Union highlighted key issues that were uncovered in a recent study performed by Consumer Reports using over 2 billion quotes from 700 companies in all 50 states. This research found that in Oklahoma, good drivers with bad credit were paying up to 30 percent more than bad drivers with good credit.

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America’s racial wealth gap was 397 years in the making; we shouldn’t take that long to close it

man jumping across gapChattel slavery of African-Americans lasted for 246 years, from when the first slaves were brought to Virginia in 1619 to when it was finally abolished in 1865. Another 99 years passed until the 1964 Civil Rights Act ended Jim Crow laws that had systematically denied equal opportunity to African-Americans. Even after the end of Jim Crow, discrimination against African-Americans has continued in numerous well-documented ways, and all people of color in the United States continue to lag well behind whites when it comes to income and wealth.

The impact of this history is very much with us today. As a recent report from the Corporation for Enterprise Development (CFED) points out, if the wealth of average Black families continues to grow at the same pace as it is growing today, it will take 228 years to reach the wealth of average White families today — nearly as long as the 246-year span of slavery. And that’s just to reach the current wealth levels of White families, not to catch up with White family wealth that is still growing at three times the rate of the Black population. For the average Latino family, it would take 84 years to reach the amount of wealth that White families have today.

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How new federal rules can keep Oklahomans out of debt traps

by | August 8th, 2016 | Posted in Financial Security | Comments (0)

GET CASH NOW! A neon green sign boasts a quick fix for your financial woes as you count out the few dollars you have to pay bills and buy groceries for your children. Although you are employed, this has been a particularly hard month. The payday loan, so named because you usually have to pay the loan back by your next payday, could be the solution to your problems — or it could be a debt trap.

For most borrowers it ends up being a debt trap. Borrowers start with one loan, but they often cannot afford to pay it back by their next payday. The lender then gives the option to take out another loan to cover the cost of the original loan. These “churned loans” are the hallmark of the predatory payday lending industry. Borrowers who fall into the trap end up going deeper and deeper into debt with numerous small, consecutive, short-term loans at an average APR of nearly 400 percent. 

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