An important new resource is now available for Georgia’s consumers.

The Consumer Financial Protection Bureau (CFPB), established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, has launched its website. The new agency sets out to make financial transactions more understandable for the average consumer and help protect them from the most unscrupulous lenders. To check out the website, click here.

The agency and its website are still a work in progress. A consumer response center will eventually be made available, as well as a dedicated education resource center. For now, some basic resources can be found on the CFPB website here. Consumers can also  submit comments and questions related to the agency here.

To learn the basics on the new CFPB, check out the short video below.

* The IRS currently requires tax preparers to disclose the financial terms of RALs, yet consumers continue to be duped into taking out high-interest loans at high costs because of the confusing financial fine print. Georgia law should force tax preparers to disclose the real terms of the loans in layman’s terms and strengthen penalties for tax preparers who fail to do so. This disclosure could be easily accomplished through fact sheets provided to consumers and displayed in plain sight in tax preparers’ offices.

* Require that tax preparers selling RALs provide consumers with a copy of their loan agreement and that consumers with limited ability to read or understand English be given a fair opportunity to understand the financial terms of the loan.

Through Refund Anticipatory Loans (RALs) tax preparers, such as H&R Block, pressure consumers to take out high-interest loans carrying annual percentage rates as high as 700 percent. Most of these consumers are recipients of the Earned Income Tax Credit (EITC) – which helps moderate the heavy income tax burden for poor families – whose households would benefit the most from this annual tax relief.

Tax preparers aggressively market “early tax refunds” primarily to America’s poor families. Consumers are misled to think of RALs not as loans, but as quick refunds. In fact, many consumers report that they are not told they could receive their tax refund, in full, within weeks. Not understanding the real terms of a refund anticipatory loan, poor families that qualify for the EITC accept the predatory loans with its high fees.

In Metro Atlanta, 15 percent of taxpayers qualified for the EITC in 1999, according to the most recent findings of The Brookings Institution. Of that group, 51 percent utilized a refund anticipatory loan. On average, RALs ate away at Atlanta’s EITC by 59.3 percent – almost two-thirds of the intended tax credit.

Ultimately, one-quarter of tax returns that would boost purchasing power in the state’s poorest communities goes instead into the pockets of wealthy out-of-state corporations.

Georgia lawmakers no longer can allow these companies to fatten their wallets at the tables of the working poor.

Title pawn loans are short-term, high-interest loans that use a borrower’s car title as collateral. Title lenders often target poor communities and military installations with promises of hassle-free fast cash. In reality, borrowers often do not understand the ultimate price of their title loan – which is cryptically hidden in contracts with confusing financial language.

When borrowers cannot keep up with payments on the triple-digit interest common in the business, title lenders take possession of borrowers’ cars -oftentimes their only transportation to work, the grocery store and doctors’ offices.

Lawmakers in Georgia and several other states have recognized the debt trap that title lenders set – with triple-digit interest rates, endless loan roll-overs and repossessions. Some states outlaw title pawn loans altogether. Kentucky caps the Annual Percentage Rate (APR) on title loans at 36 percent, and Florida caps title loan APRs at 30 percent – ten times less than Georgia.

Some of those existing and proposed solutions include:

* Level the playing field

Georgia law currently allows title lenders to charge a brutal 300 percent APR on small loans. This unreasonably high limit traps borrowers on a treadmill of debt and makes it difficult for Georgia’s working families to get their auto titles back from lenders. Other small loan lenders, regulated under the state’s Industrial Loan Act, operate under a 60 percent APR cap. Requiring the same of title lenders would level the playing field for all small loan businesses, and would help give borrowers a fighting chance to pay down their debt.

* Require an affordable installment plan on title loans

Currently, all title pawn loans are structured as a 30-day balloon loan. If borrowers miss a monthly payment, they either lose their vehicle or are forced to extend the loan – tacking on another month of interest.

* Require title lenders to refund surplus once a repossessed vehicle is sold

A borrower can lose a car worth $3,000 simply for defaulting on a $500 loan. Today, even if the lender sells the car at a profit – over and above what was owed – the borrower gets nothing. Georgia should require title lenders to return the difference to the customer after a car is sold to settle a debt.

* Title lenders should be licensed and closely monitored by the state

Consumers have nowhere to turn if they believe they have been victimized by an unscrupulous title lender. By licensing lenders and providing on-going oversight, Georgia could set and enforce standards to guarantee fair treatment of working families.

Payday lending was never legal in Georgia. But the penalty for offering payday loans was never harsh enough to deter lenders, nor did it give the police much incentive to enforce the law.

That all changed in May 2004 when Governor Sonny Perdue signed into law the nation’s strongest protections for consumers against payday lenders.

Payday loans are short-term loans that lack traditional barriers – such as credit checks – and instead allow borrowers to use post-dated paychecks as collateral.

Before Georgia’s anti-payday law was signed, payday lenders regularly ensnared working Georgians, single parents, teachers and police officers in a straightjacket of debt. Even worse, these businesses clustered around military bases and in poor neighborhoods, taking from the tables of Georgia’s neediest families.

Business is good in the payday lending industry. For example:

* There are approximately 10,000 payday outlets nationwide.
* Payday industry revenue, which was less than $1 billion in 1998, reached $28 billion last year.
* The Center for Responsible Lending estimates that a typical payday borrower ends up paying back $793 for a $325 loan.
* Fort Worth-based Cash America International Inc. reported in October 2006 that its third-quarter net income jumped 35% from a year earlier, to $12.94 million. The third quarter was the twentieth in a row that Cash America has reported an increase in net income above 20%.
* Advance America was founded in 1997 and is the country’s largest provider of payday cash advance services through roughly 2,750 centers in 36 states.

Just because Georgia has strong legislation outlawing payday lending, the payday industry isn’t sitting and nursing its wounds. In 2007, payday lenders from out of state came to Georgia to push House Bill 163, which would have repealed Georgia’s groundbreaking 2004 law and opened the door to triple-digit interest rates and predatory debt traps. Fortunately, the bill was voted down on the house floor. But don’t be surprised if the lenders return next year with a similar bill in tow. Payday lenders made a fortune in Georgia before lawmakers kicked them out. Nationally, payday lending has grown into a billion-dollar industry, characterized by harassing collection tactics and dishonest marketing schemes. It’s almost assured that industry leaders will lobby for a return to the Peach State.

We can’t let that happen. Georgia’s new payday lending law has changed the business of short-term loans for the better and forced payday lenders and their “fast cash” loan schemes out of the state.

Legalizing or “regulating” payday lending would reverse current consumer protections and leave many Georgians vulnerable to overwhelming interest rates and loan rollovers. Rolling back the state’s payday ban would be a step in the wrong direction and would hurt Georgia families.

Other states have attempted to regulate the payday lending industry, with disastrous consequences. You can read about it here, in Georgia Watch’s report, Don’t Fix What Ain’t Broke: The Payday Lending Ban in Georgia Works.