Community Investment News (January 2008)


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Rate Caps: the Only Proven Cure for Payday Loan Debt

"The only proven way for state policymakers to protect their citizens from predatory small loans is to enforce a comprehensive small loan law with an interest rate cap at or around 36 percent," concludes the Center for Responsible Lending (CRL) in a report released Dec. 13, 2007. See www.responsiblelending.org.

The report, entitled "Springing the Debt Trap: Rate caps are only proven payday lending reform," reaches that conclusion after evaluating the effectiveness of three types of payday loan policies: little or no restriction; an interest rate cap; and a middle ground where payday lenders can charge triple-digit interest rates with certain restrictions. To read more about the report's findings and the CRL's recommendations, click here.

Hot Federal Legislation

  • HR2419 - The 2007 Farm Bill will further strengthen Food Stamp programs, improve food stamp resource limits, and restore food stamp eligibility to more vulnerable groups currently left out. See www.frac.org.
  • S2341 - The Focusing Investment Resources for a Safe Transition (FIRST) Act if passed, will provide Individual Development Accounts (IDAs) to support foster youth who are aging out of the foster care system.
  • S2136 - The Helping Families Save Their Homes in Banktruptcy Act of 2007 was introduced to address the treatment of primary mortgages in banktruptcy proceedings.
  • S2452 - The Homeownership Preservation and Protection Act of 2007 eliminates prepayment penalties and yield spread premiums in sub-prime loans, contains full assignee liability and includes a fiduciary responsibility for brokers.

It's Time for Leadership on Job Training

Throughout America, there is a boom happening, but it is not one we should be especially proud of. It is a boom in very low-wage work. A growing number of jobs do not pay enough to sustain a family. Paradoxically, there are employers "many of them "who will tell you that if they could hire skilled workers, those workers would be paid career-path family-sustaining wages. Promising strategies already exist to deliver the necessary training and skills to low-paid American workers. Instead of continuing its years-long disinvestment in job training, the federal government can prompt and support the use of these and similar strategies. For more information click here.

Hot Illinois Legislation

  • SB12 - The Illinois EITC Bill amends the Illinois Income Tax Act. Increases the amount of the state earned income tax credit from 5% of the federal credit to: (i) 7.5% of the federal tax credit for taxable years ending in calendar year 2007; and (ii) 10% of the federal tax credit for taxable years ending in calendar year 2008 or thereafter.
  • HB4191 - The Our Own Home Bill amends the Deposit of State Moneys Act to allow state guarantees for refinancing as well as origination of mortgage loans for qualified borrowers.

IRS considers new limits on refund anticipation loans

With the catastrophic housing market, rising costs of food and energy, and recession talks looming, many cash-strapped Americans will be tempted by quick yet very costly refund anticipation loans (RALs) during this tax season. The Internal Revenue Service announced it is considering a proposal to restrict tax preparers from offering RALs in connection with preparation of tax returns, according to American Banker. Anecdotal evidence has shown that tax preparers promote tax fraud when they encourage their consumers to inflate their anticipated tax refund. Now more than ever before, advocates have a huge responsibility and role to play in both educating consumers and proposing policies that will protect their assets. They can start by writing letters to the IRS during the 90-day comment period. To learn more, click here.

Calendar of Events

  • February 23, 2008: Money Matters Fair, Chicago, sponsored by the FDIC Alliance for Economic Inclusion.
  • March 12-15, 2008: National Community Reinvestment Coalition (NCRC) Annual Conference in Washington, D.C. For more information click here.
  • March 19 & 26, 2008: All My Money train-the-trainer curriculum in Chicago. Click here for more information. Click here to register.
  • September 11-13, 2008: "Advancing America's Asset Agenda", a conference sponsored by CFED in Washington, D.C. For more information click here.

The Community Investment Unit develops and promotes policies and programs that move people from poverty to prosperity, including financial education, access to mainstream financial services, asset building, and consumer protection. For more information, contact Dory Rand at 312.368.2007.

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