The message from the Americans for Fairness in Lending (AFFIL) is clear: Your home, your family, and your life are all in the crosshairs of predatory lenders across the nation. One look at their marketing material leaves no doubt in your mind that the consequences are dire unless we take action. Now AFFIL, along with a number of partner organizations including the Center for Responsible Lending, the NAACP, and the Consumers Union, have unveiled a new publicity awareness campaign designed to bring their message into your living rooms.

At a press conference designed to coincide with the release of the new credit card documentary, “Maxed Out”, AFFIL spilled the details on what exactly they stand for and The Consumerist was there to soak up the details.

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According to Executive Director Kirsten Keefe, AFFIL’s goal is to, “Raise awareness in America and to shine a spotlight on the consumer debt industry.” The concept had arisen two years ago when a number of consumer groups had banded together and decided that more should be done to raise the national awareness of debt issues. Hot on the agenda of topics that were to be brought up were not only payday lending, but sub-prime home mortgages, and how credit cards have become the new “Safety Net” for citizens across the US. Each topic is a key focus under the umbrella of “Predatory Lending” that AFFIL aims to disarm.

AFFIL’s new marketing push comes on the heels of the announcement by payday lending trade association, Community Financial Services of America (CFSA), of their new commitment to self-reform (see “PayDay Loans’ New Ad About How Payday Loans Are For Upstanding Citizens” and “PayDay Loans Are Awesome“). However whereas the CFSA’s campaign goal was to announce their new focus on ethics and reform, possibly in hopes to avoid a swath of legislative proposals, AFFIL hopes to encourage actual legislative change.

AFFIL Member Groups Previously Aligned With Payday Lending.

Although payday lending is an AFFIL concern, their focus appears to be on gross abuses rather than the industry as a whole. In particular, the CFSA is already strategically positioned outside of the target of AFFIL’s upcoming war on predatory lending and in some cases even worked closely with some of AFFIL’s members.

At the press conference, The Consumerist asked AFFIL about how it responds to common statements that payday lenders make, such as their loans being a “viable financial tool for people with short term money problems.” The question was posed to their panel and was picked up by Marva Williams, Senior Vice President of the Woodstock Institute, a non-profit research organization. Williams was quick to point out that the Woodstock Institute had actually aligned with the CFSA in Illinois to help push a series of self-reforms, also adding that, “Payday loans are very easy to get into, and very difficult to get out of. Although they may be a somewhat viable short-term alternative in the long-term they are very onerous.”

Although this sounds like the Woodstock Institute is against payday lending in excess, they certainly weren’t against the industry as a whole. The “Payday Reform Act” was passed into law on June 9, 2005, and served a major boon to both the Woodstock Institute, which received major credit for helping the CFSA establish reforms, and to the CFSA itself, who managed to use the reform as a coup against their local competitors. Williams was quoted by the Chicago Sun-Times in February 2005 as saying, “We wanted to develop consumer protections, but we also wanted to do so in a way that allows people to take out a payday loan in Illinois.”

Along with the Woodstock Institute, at least one other AFFIL partner, the National Urban League, has worked directly with the CFSA.

Regardless of any AFFIL partners previous work with the CFSA, Williams makes it clear that a Credit Union payday loan is a much better alternative than a payday loan off the street, even pointing out that for many Credit Unions an interest cap of 18% APR is financially sustainable. In a follow-up Williams points out that, “They’ve developed underwriting practices that allow many of the credit union members to access this product, but they’ve also incubated some very important consumer protections as well as integrating financial education and automatic savings incentives that really help make the product financially sustainable for the credit union but also offer benefits to the payday loan borrower as well.”

Fundamental Change in Credit Markets

The last speaker at the press conference was Professor Elizabeth Warren, Leo Gottleib Professor of Law and author of, “The Two Income Trap: Why Middle Class Mothers and Fathers are Going Broke”. Perhaps the most impassioned speaker to take the microphone, Warren laid out a damning case against the credit card industry:

“In the last twenty five years, the size of a contract that governs that [credit card] relationship has gone from a page long to more than thirty pages long and the reason for that shift is that the business model has fundamentally changed.” Says Warren, also adding, “Card companies still make money like they always did, with merchant fees and annual fees, but what has changed is that when they can pass out cards to everyone, make a little money on any of those transactions, but then catch the customers who stumble in the slightest; the one who loses a job, or gets sick, or just falls a little bit behind. That’s the customer who ends up paying the 29 percent default rate of interest, 39 dollar late fees, 49 dollar over limit fees, extra interest and double cycle billing and whatever else the credit card company wants to dish out.”

Though despite the feeling like Warren managed to nail the issue on the head, it’s hard not to feel like AFFIL is a great organization that shows up after the tornado has touched down and the house is already destroyed. Much like the family shown destitute in their marketing literature, maybe the picture wouldn’t have been so bleak if there were more Elizabeth Warrens sounding the bullhorn 15 years ago. As it stands, credit card companies and lenders have gotten away with their tactics for far too long and have much more money than the paltry $500,000 dollars that AFFIL has brought to the table (according to the NYT they’re hoping to solicit more money). We’ll probably go and catch a copy of “Maxed Out” when it comes to a theater near us, but in the mean time we’ll be interested in seeing if the AFFIL puts their money where their mouth is and gets real pro-consumer lending reforms enacted.

— THOMAS MOORE

References:
AFFIL official site
AFFIL’s Principles of Fairness in Lending
Critics of Lending Practices Adopt Harder Edge [New York Times]

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