(October 5, 2006 – New York, NY) Rafael Morales of the National Federation of Community Development Credit Unions (the Federation) today presented testimony urging the New York State Assembly to strengthen the state’s consumer protection laws, particularly the laws pertaining to predatory lenders. Morales, the Federation’s Communications Officer, spoke before the Assembly Standing Committee on Consumer Affairs and Protection and the Assembly Standing Committee on Banks on behalf of the New York State Coalition of Community Development Financial Institutions (the NY CDFI Coalition), which the Federation co-founded in 1995.
New York State has some of the strictest consumer protections and anti-usury laws in the country, and the Coalition’s testimony urged the Assembly to promote and expand these protections. At the hearing, Morales pointed out that additional protections would help to curb payday and predatory lenders who circumvent state legislation by using Internet offers and placard promotions to lead consumers to out-of-state lenders who do not have to comply with state regulations.
New Yorkers for Responsible Lending (NYRL), an advocacy group which includes both the Federation and the New York CDFI Coalition, also delivered testimony at the hearing. Saara Nafici of the Neighborhood Economic Development Advocacy Project (NEDAP) testified on behalf of NYRL and cited specific abuses committed by predatory lenders, tax-preparers, rent-to-own stores, and financial institutions.
Some of the abusive products cited in her testimony include Refund Anticipation Loans (RALs) and so-called “bounce protection,” which Nafici likened to “high-cost, often usurious, overdraft loans tacked onto checking accounts without notice to the consumer and at a cost that is not reasonably related to any risk incurred by the bank.”
Morales was also joined at the hearing by New York CDFI Coalition Steering Committee member David Raynor, Executive Director of the Leviticus 25:23 Alternative Fund, a community development revolving loan fund organized in 1983 by church groups located in the New York metropolitan area. Raynor has been especially active with the Coalition’s advocacy for the implementation and funding of a New York State CDFI Fund, comparable to the federal CDFI Fund housed at the U.S. Treasury Department.
Morales pointed out that there is more that the State government can do to promote greater access to affordable credit and financial services for consumers in need. The work of the Federation and the New York CDFI Coalition informed bills by the New York State Assembly and Senate to create a statewide CDFI fund that would capitalize community based lenders to increase their scale and service delivery to consumers throughout the state. Morales stressed that the CDFI bill should be a major legislative and budget priority in the upcoming session, and such a fund would help CDFIs across the state to significantly expand the reach and scope of their programs to low- and moderate income New Yorkers.
To view the testimony presented, please click here.