Discriminatory Mortgages $35 million fines

CFPB and DOJ Take Action Against National City Bank for Discriminatory Mortgage Pricing

Harmed African-American and Hispanic Borrowers Will Receive $35 Million in Restitution

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) filed a joint complaint against National City Bank for charging higher prices on mortgage loans to African-American and Hispanic borrowers than similarly creditworthy white borrowers between the years 2002 and 2008. The agencies also filed a proposed order to settle the complaint that requires National City Bank, through its successor PNC Bank, to pay $35 million in restitution to harmed African-American and Hispanic borrowers.

“Borrowers should never have to pay more for a mortgage loan because of their race or national origin,” said CFPB Director Richard Cordray. “Today’s enforcement action puts money back in the pockets of harmed consumers and makes clear that we will hold lenders accountable for the effects of their discriminatory practices.”

“This settlement will provide deserved relief to thousands of African-American and Hispanic borrowers who suffered discrimination at the hands of National City Bank,” said Attorney General Eric Holder. “As alleged, the bank charged borrowers higher rates not based on their creditworthiness, but based on their race and national origin. This alleged conduct resulted in increased loan prices for minority borrowers. This case marks the Justice Department’s latest step to protect Americans from discriminatory lending practices, and shows we will always fight to hold accountable those who take advantage of consumers for financial gain.”

National City Bank originated mortgage loans directly to consumers in its retail offices, as well as through independent mortgage brokers. Between 2002 and 2008, National City made over 1 million mortgage loans through its retail channel and over 600,000 loans through independent brokers. PNC acquired National City at the end of 2008.

The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating against loan applicants in credit transactions on the basis of characteristics such as race and national origin. In the complaint, the CFPB and DOJ allege that National City Bank violated the ECOA by charging African-American and Hispanic borrowers higher mortgage prices than similarly creditworthy white borrowers. The DOJ also alleges that National City violated the Fair Housing Act, which similarly prohibits discrimination in residential mortgage lending.

The CFPB and DOJ’s joint investigation began in 2011. The agencies allege that National City Bank’s discretionary pricing and compensation policies caused the discriminatory pricing differences. National City gave its loan officers and brokers the discretion to set borrowers’ rates and fees. National City then compensated the officers and brokers from extra costs paid by consumers. Over 76,000 African-American and Hispanic borrowers paid higher costs because of this discriminatory pricing and compensation scheme.

Today’s action marks the first joint lawsuit brought in federal court by the CFPB and the DOJ to enforce federal fair lending laws. On December 6, 2012, the CFPB and the DOJ signed an agreement that has facilitated strong coordination between the two agencies on fair lending enforcement, including the pursuit of joint investigations such as this one.

Enforcement Action

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the ECOA authorize the CFPB to take action against creditors engaging in illegal discrimination. The consent order, which is subject to court approval, requires that PNC Bank, as the successor to National City Bank, pay restitution. Specifically, the order requires:

  • $35 million to be paid to a settlement fund. That settlement fund will go to allegedly affected African-American and Hispanic borrowers who obtained mortgage loans from National City between 2002 and 2008.
  • Funds to be distributed through a settlement administrator. The CFPB and the DOJ will identify victims by looking at loan data. A settlement administrator will contact consumers if necessary, distribute the funds, and ensure that impacted borrowers receive compensation.
  • The settlement administrator be accessible. The settlement administrator will set up various cost-free ways for consumers to contact it with any questions about potential payments. The CFPB will release a Consumer Advisory with contact information for the settlement administrator once that person is chosen.

The consent order terms take into account a number of factors, including the age of the loans, that National City Bank no longer exists, and that PNC does not employ National City’s mortgage origination policies.

The complaint and the proposed consent order resolving the complaint have been simultaneously filed with the United States District Court for the Western District of Pennsylvania. The complaint is not a finding or ruling that the defendants have actually violated the law. The proposed federal court order will have the full force of law only when signed by the presiding judge.

The full text of the CFPB’s Complaint is available at: http://files.consumerfinance.gov/f/201312_cfpb_complaint_national-city-bank.pdf

The full text of the CFPB’s Consent Order is available at: http://files.consumerfinance.gov/f/201312_cfpb_consent_national-city-bank.pdf

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Auto Loan Scams

CFPB and DOJ Order Ally to Pay $80 Million to Consumers Harmed by Discriminatory Auto Loan Pricing

 

Ally to Pay Additional $18 Million in Civil Penalties for Harming More Than 235,000 Minority Borrowers

Jun 27 2013

CFPB Orders Auto Lenders to Refund Approximately $6.5 Million to Servicemembers

CFPB Takes Action Against Two Companies for Charging Illegal Debt-Relief Fees

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CFPB Sues For-Profit College Chain ITT For Predatory Lending

CFPB Sues For-Profit College Chain ITT For Predatory Lending

ITT Pushed Consumers into High-Cost Student Loans Likely to Fail

WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against ITT Educational Services, Inc., accusing the for-profit college chain of predatory student lending. The CFPB alleges that ITT exploited its students and pushed them into high-cost private student loans that were very likely to end in default. The CFPB is seeking restitution for victims, a civil fine, and an injunction against the company.

“ITT marketed itself as improving consumers’ lives but it was really just improving its bottom line,” said CFPB Director Richard Cordray. “We believe ITT used high-pressure tactics to push many consumers into expensive loans destined to default. Today’s action should serve as a warning to the for-profit college industry that we will be vigilant about protecting students against predatory lending tactics.”

Like the mortgage market in the lead-up to the financial crisis, the for-profit college industry may be experiencing misaligned incentives. These colleges benefit when students take out large amounts of loans, regardless of the students’ long-term success. The CFPB is concerned that some of these corporations may be employing practices to coax consumers into taking out more federal and private student loans. Today’s announcement is the Bureau’s first public enforcement action against a company in the for-profit college industry.

ITT Educational Services, Inc. is an Indiana-based for-profit provider of post-secondary technical education. Tens of thousands of students are enrolled online or at one of ITT’s roughly 150 institutions in nearly 40 states. ITT’s tuition costs are among the highest in the country in the for-profit industry. Earning an associate’s degree at ITT can cost more than $44,000. Bachelor’s degree programs can cost $88,000. That is significantly higher than the cost of similar degrees at a community college or a public four-year institution.

Most of ITT’s students borrow large sums to pay the high tuition costs and the majority of this money is borrowed from federal student loan programs. But private student loans also provide critical revenue for ITT. Because most ITT students’ federal aid does not cover the full cost of an ITT program, most students face a “tuition gap” requiring them to find other sources of funding.

The CFPB’s lawsuit alleges that ITT encouraged new students to enroll at ITT by providing them funding for this tuition gap with a zero-interest loan called “Temporary Credit.” This loan typically had to be paid in full at the end of the student’s first academic year. But ITT knew from the outset that many students would not be able to repay their Temporary Credit balances or fund their next year’s tuition gap.

The CFPB lawsuit alleges that between July 2011 and December 2011, ITT pushed its students into repaying their Temporary Credit and funding their second-year tuition gaps through high-cost private student loan programs. Students were left in the dark about the fact that taking out these high-cost loans would be required to continue their studies. However, ITT’s CEO revealed in investor calls that converting the temporary loans to long-term loans was the company’s “plan all along.”

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. Specifically, in today’s lawsuit, the Bureau alleges the following conduct by ITT:

  • Pressured into predatory loans: ITT used its financial aid staff to rush students through an automated application process without affording them a fair opportunity to understand the loan obligations involved. In some cases, students did not even know they had a private student loan until they started getting collection calls. The loans were high-cost. For borrowers with credit scores under 600, for example, the costs of the private student loans included 10 percent origination fees and interest rates as high as 16.25 percent.
  • Credits not transferable: ITT was accredited by a national organization that accredits many for-profit schools, but the credits that students earned typically did not transfer to local community colleges or other nonprofit schools such as public or private colleges. ITT used the prospect of expulsion and the loss of the money already spent during the student’s first year to coerce students into taking out the private loans.
  • Misleading future job prospects: The Bureau believes that ITT’s representations led students to think that when they graduated they were likely to land good jobs and enough salary to repay their private student loans. In this way, ITT exploited student expectations while it knew that a majority of students would default.
  • Loans likely to fail: ITT knew that most of its students would ultimately default on their private student loans; it projected a default rate for its students of 64 percent. Defaulting on private student loans can have grave consequences for consumers. It can make it difficult to get any kind of loan for years and even affect a borrower’s job prospects. And, because private student loans are difficult to discharge in bankruptcy, the debt can be very difficult to recover from.

The complaint against ITT can be found at: http://files.consumerfinance.gov/f/201402_cfpb_complaint_ITT.pdf

The Bureau’s complaint is not a finding or ruling that the defendant has actually violated the law.

To assist student loan borrowers who may be in delinquency or default, the CFPB recently launched an updated version of the Repay Student Debt interactive tool.

The CFPB also recently finalized a rule allowing it to supervise certain nonbank servicers of federal and private student loans. The rule takes effect on March 1.

CFPB takes complaints about student loans. To submit a complaint, consumers can:

  • Go online at consumerfinance.gov/complaint
  • Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)
  • Fax the CFPB at 1-855-237-2392
  • Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244
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Consumers Report Being Hounded About Debts Not Owed

Consumers Report Being Hounded About Debts Not Owed

Top Debt Collection Complaints Also Include Aggressive Communication Tactics and Threatening Illegal Actions

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today issued a report on the more than 30,000 consumer complaints it has received about the debt collection market. The report finds that many consumers complain that they are being hounded by debt collectors about debts they do not owe. Top complaints also include debt collectors’ use of aggressive communication tactics and threats of illegal actions.

“Consumers should never be hounded about debts they do not owe,” said CFPB Director Richard Cordray. “We will not tolerate companies harassing consumers or threatening illegal actions in the debt collection market. We will continue to work hard to ensure that consumers are treated with dignity and fairness.”

Debt collection is a multi-billion dollar industry. It is estimated that there are more than 4,500 debt collection firms nationwide. Banks and other original creditors may collect their own debts or hire third-party debt collectors. Original creditors and other debt owners also may sell their debts to debt buyers. Debt buyers may sell the debt, collect the debt themselves, or hire third-party debt collectors to do so.

Approximately 30 million Americans had, on average, $1,400 of debt subject to collection in 2013. The main law that governs the industry and protects consumers is the 1977 Fair Debt Collection Practices Act (FDCPA). In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) revised the FDCPA, making the Bureau the first agency with the power to issue substantive rules under the statute. Today’s annual report to Congress highlights the Bureau’s efforts to carry out the FDCPA.

Consumer Complaints

The Bureau began accepting debt collection complaints in July 2013. These complaints quickly became the largest source of complaints each month. The Bureau received 30,300 debt collection complaints between July and December 2013. Companies have already responded to about 82 percent of the complaints the Bureau has sent to them for a response in that time frame. The top three complaints were about:

  • Collectors hounding consumers about a debt they do not owe: More than one-third of the complaints the CFPB handled were about a debt collector continually attempting to collect a debt that the consumer does not believe is owed. Of these complaints, almost two-thirds of consumers report that the debt is not theirs, while others report that the debt was paid, was the result of identity theft, or was discharged in bankruptcy.
  • Aggressive communication tactics used by debt collectors: Nearly a quarter of the complaints received by the Bureau were about debt collectors using inappropriate communication tactics. More than half of those complaints cite frequent or repeated calls from a collector and often the collector is calling the wrong phone number. Consumers also complain about debt collectors calling their places of employment or collectors using obscene, profane, or abusive language.
  • Taking or threatening an illegal action: About 14 percent of consumers report that a company is taking or threatening an illegal action. Most of these complaints are about threats to arrest or jail consumers if they do not pay. Other complaints relate to collectors threating to sue or attempting to seize property.

CFPB Advances in Debt Collection Market in 2013

The CFPB took several important steps to protect consumers and create a level playing field for law-abiding debt collectors in 2013. The Bureau’s larger participant rule for debt collection became effective on January 2, 2013. Under this rule, the Bureau has supervisory authority over any firm with more than $10 million in annual receipts from consumer debt collection activities, which extends to about 175 debt collection companies.

In November 2013, the Bureau took the first step toward considering consumer protection rules for the debt collection market with an Advance Notice of Proposed Rulemaking (ANPR). Through this ANPR, the Bureau is collecting information on a wide array of issues, including the accuracy of information used by debt collectors, how to ensure consumers know their rights, and the communication tactics collectors employ to recover debts. The Bureau can use the information it gathers to inform future rulemaking.

The Bureau also pursued two debt collection enforcement actions in 2013. The Bureau sued an online loan servicer, CashCall Inc., its owner, its subsidiary, and its affiliate, for collecting money on loans that were legally invalid. The Bureau also ordered payday lender, Cash America International, Inc. to refund up to $14 million to consumers for robo-signing court documents in debt collection lawsuits. Through its ongoing supervision and enforcement activities, the Bureau will continue to prevent and deter debt collectors from violating the law.

The Bureau issued sample letters consumers can use in dealing with debt collectors. These letters may help consumers obtain valuable information about claims being made against them or may help consumers protect themselves from inappropriate or unwanted collection activities. And the Bureau’s interactive online tool, Ask CFPB, contains more than 85 questions and answers related to the topic of debt collection.

A copy of today’s report is available at: http://files.consumerfinance.gov/f/201403_cfpb_fair-debt-collection-practices-act.pdf

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$2 Billion to Homeowners for servicing wrongs

CFPB, State Authorities Order Ocwen to Provide $2 Billion in Relief to Homeowners for Servicing Wrongs

Largest Nonbank Servicer Will Also Refund $125 Million to Foreclosure Victims and Adhere to Significant New Homeowner Protections

WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB), authorities in 49 states, and the District of Columbia filed a proposed court order requiring the country’s largest nonbank mortgage loan servicer, Ocwen Financial Corporation, and its subsidiary, Ocwen Loan Servicing, to provide $2 billion in principal reduction to underwater borrowers. The consent order addresses Ocwen’s systemic misconduct at every stage of the mortgage servicing process. Ocwen must also refund $125 million to the nearly 185,000 borrowers who have already been foreclosed upon and it must adhere to significant new homeowner protections.

“Deceptions and shortcuts in mortgage servicing will not be tolerated,” said CFPB Director Richard Cordray. “Ocwen took advantage of borrowers at every stage of the process. Today’s action sends a clear message that we will be vigilant about making sure that consumers are treated with the respect, dignity, and fairness they deserve.”

The proposed Ocwen Consent Order is available at: http://files.consumerfinance.gov/f/201312_cfpb_consent-order_ocwen.pdf

Ocwen, a publicly traded Florida corporation headquartered in Atlanta, Ga., is the largest nonbank mortgage servicer and the fourth-largest servicer overall in the United States. As a mortgage servicer, it is responsible for collecting payments from the mortgage borrower and forwarding those payments to the owner of the loan. It handles customer service, collections, loan modifications, and foreclosures.

Ocwen specializes in servicing subprime or delinquent loans and places a major emphasis on resolving delinquency through loss mitigation or foreclosure. In recent years, it has acquired competitors – including Homeward Residential Holdings LLC (formerly American Home Mortgage Servicing Inc.) and Litton Loan Servicing LP. It has also acquired the mortgage servicing rights from the portfolios of some of the country’s largest banks.

The CFPB is charged with enforcing the Dodd-Frank Wall Street Reform and Consumer Protection Act which protects consumers from unfair, deceptive, or abusive acts or practices by mortgage servicers – whether they are a bank or nonbank. State financial regulators, state attorneys general, and the CFPB uncovered substantial evidence that Ocwen violated state laws and the Dodd-Frank Act.

In early 2012, examinations by the Multistate Mortgage Committee, which is comprised of state financial regulators, identified potential violations at Ocwen. In addition, the Federal Trade Commission referred its investigation of Ocwen to the CFPB after the Bureau opened in July 2011. The Bureau then teamed with state attorneys general and state regulators to investigate and resolve the issues identified. Today’s settlement is a multi-jurisdictional collaborative effort.

Borrowers Pushed into Foreclosure by Servicing Errors

The CFPB and its partner states believe that Ocwen was engaged in significant and systemic misconduct that occurred at every stage of the mortgage servicing process. According to the complaint filed in the federal district court in the District of Columbia, Ocwen’s violations of consumer financial protections put thousands of people across the country at risk of losing their homes. Specifically, the complaint says that Ocwen:

  • Took advantage of homeowners with servicing shortcuts and unauthorized fees: Customers relied on Ocwen to, among other things, treat them fairly, give them accurate information, and appropriately charge for services. According to the complaint, Ocwen violated the law in a number of ways, including:
    • Failing to timely and accurately apply payments made by borrowers and failing to maintain accurate account statements;
    • Charging borrowers unauthorized fees for default-related services;
    • Imposing force-placed insurance on consumers when Ocwen knew or should have known that they already had adequate home-insurance coverage; and
    • Providing false or misleading information in response to consumer complaints.
  • Deceived consumers about foreclosure alternatives and improperly denied loan modifications: Struggling homeowners generally turn to mortgage servicers, the link to the owners of the loans, as their only means of developing a plan for payment. Ocwen failed to effectively assist, and in fact impeded, struggling homeowners trying to save their homes. This included:
    • Failing to provide accurate information about loan modifications and other loss mitigation services;
    • Failing to properly process borrowers’ applications and calculate their eligibility for loan modifications;
    • Providing false or misleading reasons for denying loan modifications;
    • Failing to honor previously agreed upon trial modifications with prior servicers; and
    • Deceptively seeking to collect payments under the mortgage’s original unmodified terms after the consumer had already begun a loan modification with the prior servicer.
  • Engaged in illegal foreclosure practices: One of the most important jobs of a mortgage servicer is managing the foreclosure process. But Ocwen mishandled foreclosures and provided consumers with false information. Specifically, Ocwen is accused of:
    • Providing false or misleading information to consumers about the status of foreclosure proceedings where the borrower was in good faith actively pursuing a loss mitigation alternative also offered by Ocwen; and
    • Robo-signing foreclosure documents, including preparing, executing, notarizing, and filing affidavits in foreclosure proceedings with courts and government agencies without verifying the information.

Remedies: Consumer Protections

Today’s proposed court order will bar Ocwen from committing such violations in the future. It requires Ocwen to provide $125 million in refunds to foreclosed-upon consumers and $2 billion in loan modification relief to its customers through principal reduction. The refunds and relief also apply to consumers whose loans were previously serviced by Homeward Residential Holdings and Litton Loan Servicing. According to the proposed order, Ocwen must:

  • Provide $2 billion in relief to underwater borrowers: Over a three-year period, Ocwen must complete sustainable loan modifications that result in principal reductions totaling $2 billion. For loan modification options, eligible borrowers may be contacted directly by Ocwen. Or borrowers may contact Ocwen to obtain more information about specific loan modification programs and to find out whether they may be impacted by this settlement. Ocwen can be reached at 1-800-337-6695 or ConsumerRelief@Ocwen.com. If Ocwen fails to meet this commitment, it must pay a cash penalty in the amount of any shortfall to the CFPB and the states.
  • Provide $125 million in refunds to foreclosure victims: Ocwen must refund $125 million to consumers whose loans were being serviced by Ocwen, Homeward Residential Holdings, or Litton Loan Servicing, and who lost their homes to foreclosure between Jan. 1, 2009 and Dec. 31, 2012. All eligible consumers who submit valid claims will receive an equal share of the $125 million. Borrowers who receive payments will not have to release any claims and will be free to seek additional relief in the courts. Ocwen will also pay $2.3 million to administer the refund process. Eligible consumers can expect to hear from the settlement administrator about potential payments.
  • Stop robo-signing official documents: Ocwen must ensure that facts asserted in its documents about borrowers’ loans used in foreclosure and bankruptcy proceedings are accurate and supported by reliable evidence. Affidavits and sworn statements must be based on personal knowledge.
  • Adhere to significant new homeowner protections: Ocwen must change the way it services mortgages to ensure that borrowers are protected from the illegal behavior that puts them in danger of losing their homes. To ensure this, the CFPB and the states are proposing that Ocwen follow the servicing standards set up by the 2012 National Mortgage Settlement with the five largest banks. Because of Ocwen’s track record of problems handling the large volume of mortgage servicing rights it has quickly acquired in recent years, Ocwen is also being ordered to adhere to additional consumer protections, including how it manages transferred lans. Among other things, Ocwen must:
    • Properly process pending requests: For loans that are transferred to Ocwen, the company must determine the status of in-process loss mitigation requests pending within 60 days of transfer. Until then, Ocwen cannot start, refer to, or proceed with foreclosure.
    • Honor previous loan modification agreements: If the borrower has a loan modification agreement, Ocwen must honor it under the terms of the company that transferred the loan.
    • Ensure continuity of contact for consumers: Ocwen will have to ensure that consumers get regular and dependable assistance when they call for help. This includes requiring more than just a single point of contact assigned to each borrower, but also that other Ocwen employees with access to the borrower’s information be available if the borrower wants to speak to someone immediately.
    • Restrict servicing fees: All servicing fees must be reasonable, bona fide, and disclosed in detail to borrowers. For example, Ocwen cannot collect any late fees if a loan modification application is under review or if the borrower is making timely trial modification payments.
    • Notify consumers of loss mitigation options and restrict dual tracking: Ocwen generally cannot refer a borrower’s account to foreclosure while the borrower’s application for a loan modification is still pending. If the loan-modification request is denied, the borrower can appeal that decision and Ocwen cannot proceed to foreclosure until that appeal has been resolved.

In January 2013, the CFPB released new rules on mortgage servicing that will apply to every mortgage servicer. The standards that Ocwen must adhere to according to this court order are in addition to the protections offered to consumers under the new rules that take effect on Jan. 10, 2014. More information about the CFPB’s new mortgage rules can be found at: consumerfinance.gov/mortgage.

A factsheet about the proposed order filed today can be found at: http://files.consumerfinance.gov/f/201312_cfpb_factsheet_ocwen.pdf

Common consumer questions and answers about the order can be found at: http://files.consumerfinance.gov/f/201312_cfpb_common-questions_ocwen.pdf

A copy of the Ocwen complaint that the CFPB and state attorneys general filed today can be found at: http://files.consumerfinance.gov/f/201312_cfpb_complaint_ocwen.pdf

The complaint is not a finding or ruling that the defendants have actually violated the law. The proposed federal court order will have the full force of law only when signed by the presiding judge.

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Payday Loans

CFPB Finds Four Out Of Five Payday Loans Are Rolled Over Or Renewed

Research Shows the Majority of Payday Loans Are Made to Borrowers Caught in a Revolving Door of Debt

WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) issued a report on payday lending finding that four out of five payday loans are rolled over or renewed within 14 days. The study also shows that the majority of all payday loans are made to borrowers who renew their loans so many times that they end up paying more in fees than the amount of money they originally borrowed.

“We are concerned that too many borrowers slide into the debt traps that payday loans can become,” said CFPB Director Richard Cordray. “As we work to bring needed reforms to the payday market, we want to ensure consumers have access to small-dollar loans that help them get ahead, not push them farther behind.”

The report is at: http://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf

Payday loans are typically described as a way to bridge a cash flow shortage between paychecks or other income. Also known as “cash advances” or “check loans,” they are usually expensive, small-dollar loans, of generally $500 or less. They can offer quick and easy accessibility, especially for consumers who may not qualify for other credit.

Today’s report is based on data from a 12-month period with more than 12 million storefront payday loans. It is a continuation of the work in last year’s CFPB report on Payday Loans and Deposit Advance Products, one of the most comprehensive studies ever undertaken on the market. That report raised questions about the loose lending standards, high costs, and risky loan structures that may contribute to the sustained use of these products.

Today’s report provides a deeper analysis of the data, focusing on repeated borrowing by consumers after they take out an initial payday loan. A primary driver of the cost of payday loans is that consumers may roll over the loans or engage in re-borrowing within a short window of time after repaying their first loan. Today’s study looks at not only the initial loans but also loans taken out within 14 days of paying off the old loans; it considers these subsequent loans to be renewals and part of the same “loan sequence.” Today’s study is the most in-depth analysis of this pattern to date.

Key Findings: Many Payday Loans Become Revolving Doors of Debt

By focusing on payday loan renewals, the study found that a large share of consumers end up in cycles of repeated borrowing and incur significant costs over time. Specifically, the study found:

  • Four out of five payday loans are rolled over or renewed: More than 80 percent of payday loans are rolled over or renewed within two weeks. The study found that when looking at 14-day windows in the states that have cooling-off periods that reduce the level of same-day renewals, the renewal rates are nearly identical to states without these limitations.
  • Three out of five payday loans are made to borrowers whose fee expenses exceed amount borrowed: Over 60 percent of loans are made to borrowers in the course of loan sequences lasting seven or more loans in a row. Roughly half of all loans are made to borrowers in the course of loan sequences lasting ten or more loans in a row.
  • One out of five new payday loans end up costing the borrower more than the amount borrowed: For 48 percent of all initial payday loans – those that are not taken out within 14 days of a prior loan – borrowers are able to repay the loan with no more than one renewal. But for 22 percent of new loans, borrowers end up renewing their loans six times or more. With a typical payday fee of 15 percent, consumers who take out an initial loan and six renewals will have paid more in fees than the original loan amount.
  • Four out of five payday borrowers either default or renew a payday loan over the course of a year: Only 15 percent of borrowers repay all of their payday debts when due without re-borrowing within 14 days; 20 percent default on a loan at some point; and 64 percent renew at least one loan one or more times. Defaulting on a payday loan may cause the consumer to incur bank fees. Renewing loans repeatedly can put consumers on a slippery slope toward a debt trap where they cannot get ahead of the money they owe.
  • Four out of five payday borrowers who renew end up borrowing the same amount or more: Specifically, more than 80 percent of borrowers who rolled over loans owed as much or more on the last loan in a loan sequence than the amount they borrowed initially. These consumers are having trouble getting ahead of the debt. The study also found that as the number of rollovers increases, so too does the percentage of borrowers who increase their borrowing.
  • One out of five payday borrowers on monthly benefits trapped in debt: The study also looked at payday borrowers who are paid on a monthly basis and found one out of five remained in debt the entire year of the CFPB study. Payday borrowers who fall into this category include elderly Americans or disability recipients receiving Supplemental Security Income and Social Security Disability.

Today’s report will help educate regulators and the public about how the payday lending market works and about the behavior of borrowers in the market. The CFPB has authority to oversee the payday loan market. It began its supervision of payday lenders in January 2012. In November 2013, the CFPB began accepting complaints from borrowers encountering problems with payday loans.

 

Consumer Financial Protection Bureau Takes Action Against Payday Lender For Robo-Signing

Cash America to Refund up to $14 Million for Robo-Signing and Illegally Overcharging Servicemembers

Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) today took its first enforcement action against a payday lender by ordering Cash America International, Inc. to refund consumers for robo-signing court documents in debt collection lawsuits. The CFPB also found that Cash America – one of the largest short-term, small-dollar lenders in the country – violated the Military Lending Act by illegally overcharging servicemembers and their families. Cash America will pay up to $14 million in refunds to consumers and it will pay a $5 million fine for these violations and for destroying records in advance of the Bureau’s examination.

“This action brings justice to the Cash America customers who were affected by illegal robo-signing, and shows that we will vigilantly protect the consumer rights that servicemembers have earned,” said CFPB Director Richard Cordray. “We are also sending a clear message today to all companies under our watch that impeding a CFPB exam by destroying documents, withholding records, and instructing employees to mislead examiners is unacceptable.”

Payday loans are often described as a way for consumers to bridge a cash flow shortage between paychecks or the receipt of other income. They can offer quick access to credit, especially for consumers who may not qualify for other credit. Many payday loans are for small-dollar amounts that must be repaid in full in a short period of time.

Cash America is a publicly traded financial services company headquartered in Fort Worth, Texas that provides consumer financial products and services, including payday loans, lines of credit, installment loans, and pawn loans. With hundreds of retail locations across more than 20 states, it is one of the largest payday lending companies in the United States. Cash America’s Chicago-based subsidiary, Enova, offers online loans in 32 states under the brand name CashNetUSA.

Today’s action is the Bureau’s first public enforcement action against a payday lender; its first public action under the Military Lending Act; and the first public action for a company’s failure to comply fully with the CFPB’s supervisory examination authority.

Violations

After a routine CFPB examination of Cash America’s operations, the CFPB found multiple violations of consumer financial protection laws, including:

  • Robo-signing: Robo-signing generally refers to a practice where important documents that require careful review and a signature from a knowledgeable individual are instead signed by someone else, a machine, or by someone who does not follow appropriate procedures. Robo-signing can result in inaccurate court affidavits and pleadings, which may cause consumers to pay false debts, incorrect debts, or legal costs and court fees. For nearly five years, Cash America’s debt collection subsidiary in Ohio, Cashland Financial Services, Inc., had been preparing, executing, and notarizing documents filed in its Ohio collections litigations without complying with state and court-required signature rules. The CFPB estimates that about 14,000 consumers paid money as a result of debt collection litigation which may have involved reliance on improper court filings. Specifically:
    • Employees manually stamped attorney signatures on legal pleadings, and department manager signatures on balance-due and military-status affidavits, without prior review; and
    • Legal assistants notarized documents without following proper procedures.
  • Illegally overcharged servicemembers: Cash America violated the Military Lending Act, which restricts the rate on certain types of loans given to servicemembers to 36 percent. Cash America extended payday loans exceeding that rate to more than 300 active-duty servicemembers or dependents.
  • Impeded the CFPB exam: During a routine examination of Cash America that began in July 2012, the company, among other things, carelessly destroyed records relevant to the Bureau’s onsite compliance examination. Specifically, Cash America’s online lending subsidiary, Enova Financial:
    • Instructed employees to limit the information they provided to the CFPB about their sales and marketing pitches;
    • Deleted recorded phone calls with consumers; and
    • Continued to shred documents after the CFPB told them to halt such activities.
    • In addition, Cash America withheld an internal audit report related to collection practices.

Enforcement Action

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions for violations of federal consumer financial protection laws. To ensure that all impacted consumers are repaid and that consumers are no longer subject to these illegal practices, Cash America has committed to:

  • Refund consumers: Cash America has already voluntarily paid back roughly $6 million to military borrowers and victims of the robo-signing practices. Through today’s CFPB order, they have committed to offer an additional $8 million to consumers, for a total refund of up to $14 million. Consumers who were subject to debt collection lawsuits in the state of Ohio from 2008 through January 2013 are eligible. More information is available at: www.consumerfinance.gov/blog/our-first-enforcement-action-against-a-payday-lender
  • Dismiss pending collections lawsuits: Within months of the CFPB discovering the robo-signing, Cash America dismissed pending collections lawsuits, terminated all post-judgment collections activities, cancelled all judgments obtained, and corrected information it furnished to credit bureaus for the nearly 14,000 wrongful cases filed in Ohio.
  • Pay a $5 million fine: Cash America will pay a $5 million civil money penalty in connection with these serious violations. Cash America’s preemptive refunds to consumers and other actions after the Bureau discovered the conduct were considered when determining the civil money penalty amount.
  • Improve internal compliance systems: Cash America will develop and implement a comprehensive plan to improve its compliance with consumer financial protection laws, including the Military Lending Act.

The CFPB has authority to oversee the payday loan market and began its supervision of payday lenders in January 2012. In addition, the CFPB has taken a number of steps to learn more about the marketplace for payday loans, and released a report on payday loans earlier this year. That report found that payday products can lead to a cycle of indebtedness for many consumers. In early November, the CFPB began accepting consumer complaints about payday loans. More information is available at: www.consumerfinance.gov/blog/you-can-submit-a-payday-loan-complaint/

The full text of the CFPB’s Consent Order is available at: http://files.consumerfinance.gov/f/201311_cfpb_cashamerica_consent-order.pdf

Posted in Banking | Comments Off on Payday Loans

Credit Card Fraud

Banks fined $1.66 Billion for illegal credit card practices that ripped off over 10 million customers

Bank of America will refund up to 2.9 million customers $727 million plus pay $45 million in fines for illegal credit card practices such as credit monitoring and identity theft protection.

It should be obvious why banks tried so hard to kill the Consumer Financial Protection Bureau (CFPB) and continue to try to weaken this new institution’s ability to fight the rampant fraud that infests all our institutions — banking, insurance, health care, the political system, and Wall Street.

Bank of America $772 million to 2.9 million customers. Chase & JPMorgan Chase $369 million to 2.1 million customers. Discover $214 million to 3.5 million customers. Capital One $165 million to 2 million customers.  American Express $112.5 million to 335,000 customers.   GE CareCredit $34.1 million to 1.2 million customers.

Feb 27, 2014. CFPB Calls on Top Credit Card Companies to Make Credit Scores Available to Consumers.  Bureau Report Finds Accuracy Issues Top Credit Report Complaints; Warns on Avoiding Investigations

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Who lives, who dies in a never-ending energy crisis. Book review of Nothing to Envy. Ordinary Lives in North Korea

Preface. Much of this post comes from Barbara Demick’s 2010 “Nothing to Envy. Ordinary lives in North Korea”.  But first I summarize why and how energy shortages led to the hardships chronicled in this book.

Related Posts:

Alice Friedemann  www.energyskeptic.com  Author of Life After Fossil Fuels: A Reality Check on Alternative Energy; When Trucks Stop Running: Energy and the Future of Transportation”, Barriers to Making Algal Biofuels, & “Crunch! Whole Grain Artisan Chips and Crackers”.  Women in ecology  Podcasts: WGBH, Jore, Planet: Critical, Crazy Town, Collapse Chronicles, Derrick Jensen, Practical Prepping, Kunstler 253 &278, Peak Prosperity,  Index of best energyskeptic posts

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North Korea and Cuba were the first countries to lose oil, the lifeblood of civilization.  Since we will all share that fate, it’s interesting to see what happened, though keep in mind that how severe the consequences are will depend on the carrying capacity of the region you’re in, how much civil order can be maintained, and the effectiveness of the leaders in power (i.e. see “Lessons Learned from How Cuba Survived Peak Oil” that compares California to Cuba).

There are enormous differences between the fates of Cuba and North Korea. Cuba had many advantages — a benign climate with year-round rainfall where three crops a year could be grown, a culture of helping one another out, and Castro prevented middlemen and speculators from charging astronomical amounts for food.  For a detailed understanding of what happened in Cuba read this Oxfam analysis.

North Korea couldn’t be more opposite – a cold mountainous nation with only 15% of its land arable, and dictators so crazy and cruel they’re almost unmatched in history.  North Korea might be the only nation with more prisoners per capita than America.   There are many kinds of prisons, from detention centers to hard-labor camps, to gulags where your children, cousins, brothers, sisters, and parents would also be sent to for a crime you committed for generations to come.  About 1% of the population– 200,000 people –permanently work in labor camps. The threat of these prisons has made it impossible for organized resistance to happen.

It’s hard to escape, and if you do, then your relatives end up labor camps. Other nations aren’t keen on refugees – South Korea fears a collapse of North Korea and being overrun by 23 million people seeking food and shelter, and China has their own problems with 1.2 billion poor people.

The consequences of peak energy in North Korea are worse than what’s likely to happen initially in America, though some regions of the United States are likely to suffer more than others.  On the other hand, when times get hard, group-oriented cultures that depend on a large network of people tend to do better than highly individualist cultures, which is as you can learn more about in Dmitry Orlov’s Post-Soviet Lessons for a Post-American Century.

The only good aspect I could find about North Korea was that the women there are less repressed than in the past. A century ago Korean women were so completely covered in clothing that the Taliban would find no faults.  In one village north of Pyongyang women wore 7 foot long, 5 feet broad and 3 feet deep wicker hat constructions that kept women hidden from head to toe.  Perhaps even more than Muslim women Korean women were imprisoned in family compounds and could only leave at special times when the streets were cleared of men.  One historian said that Korean women were “very rigidly secluded, perhaps more absolutely than women of any other nation”.

After the Korean War ended, North Korea lost most of its infrastructure and 70% of its housing.  It was amazing that Kim Il-sung managed to create a Spartan economy where most were sheltered and clothed, had electricity, and few were illiterate.  Grain and other foods were distributed as well.  In autumn each family got about 150 pounds of cabbage per person to make kimchi, which was stored in tall earthen jars buried the garden so they would stay cold but not freeze and hidden from thieves.

North Korea became utterly dependent on the kindness of other countries for oil, food, fertilizer, vehicles, and so on.

What happens when the oil stops flowing? 

In the early 1990s North Korea suffered a double blow at a time when they were $10 billion in debt.  China wanted cash up front for fuel and food while at the same time the Soviet Union demanded the much higher price of what oil was selling for on world markets

The nation spun into a crash. Without oil and raw materials the factories shut down.  With no exports, there was no money to buy fuel and food with.  Electric plants shut, irrigation systems stopped running, and coal couldn’t be mined.  The results were:

  • Power stations and the electric grid rusted beyond fixing
  • The lights went out.
  • Running water stopped so most went to a public pump to get water
  • Electric trams operated infrequently
  • People climbed utility poles to steal pieces of copper wire to barter for food
  • There were few motor vehicles
  • And few tractors, farming was done with oxen dragging plows

Hunger struck, which made people too exhausted to work long at the few factories and farms that were still surviving.

Oil is liquid muscle. One barrel of crude oil (42-gallons) has 1,700 kilowatts of energy.  It would take a fit human adult laboring more than 10 years to equal one barrel of oil.

Perhaps this is why many nations have had no choice but to rely on muscle power after an economic crash or during a war, which means putting many people to work on farms.  After the energy crisis, North Koreans over 11 were sent out to the country to plant rice, haul soil, spray pesticides, and weed.  This was called “volunteer work”.  Now that they couldn’t afford to buy fertilizer, every family was expected to provide a human bucketful of excrement  to a warehouse miles away. The bucket was exchanged for a chit that could be traded for food.

Like Mao’s crazy schemes, North Korea’s dictators lurched from one mad idea to another — one day it was goat breeding, the next ostrich farms, or switching from rice to potatoes.

Food staples were grown on collective farms, and the state took the harvest and redistributed it.  The farmers weren’t given enough to survive on, so they slacked on their collective fields to grow food to survive on, making the food crisis even worse.   In the end, it was people in cities with no land to grow their own food on who ended up starving first.  Every year, rationed amounts of food went down.

People were told the United States was at fault, and propaganda campaigns encouraged Koreans to think of themselves as tough, and that enduring hunger without complaint was a patriotic duty, and kept everyone’s hopes up by promising bumper crops in the coming harvest.  The Koreans deceived themselves like the German Jews in the 1930s, and told themselves it couldn’t get any worse, things would get better. But they didn’t.

Worse yet, instead of spending money on agriculture, the defense budget sucked up a quarter of the GNP.  One million men out of 23 million people were kept in arms – the 4th largest military in the world.

The only place to get food became the illegal black market, where prices were terribly high, sometimes 250 times higher than what the state used to sell food for.

Natural disasters made harvests even worse – in 1994 and 1995 Korea was struck with an extremely cold winter and torrential rains in the summer that destroyed the homes of 500,000 people and rice crops for 5.2 million people.

People began picking weeds and wild grasses to stretch out meals, as well as leaves, husks, stems, and the cobs of corn.  Children can’t digest food this rough and could end up in a hospital, where doctors advised the rough material be ground up fine and cooked a long time.  It wasn’t long before malnutrition led to increasing numbers of people with pellagra and other diseases.  Hospitals soon ran out drugs and other supplies.

Who died?

Children under five.  Mothers couldn’t produce enough breast milk, nor was there baby formula, regular milk, or even ground up rice.   Children were the most vulnerable from poor diets. A minor cold would turn into pneumonia, diarrhea into dysentery.

Then the elderly.  First those over 70, then people in their 60s and 50s.

Even men and women in the prime of their lives began to die.  Men first because they have less body fat.  Also, the strongest and most athletic because their metabolisms burn more calories.

The most innocent.  People who wouldn’t steal food, lie, cheat, break the law, or betray a friend. The simple and kind-hearted who did what they were told.  It’s said that the survivors of Auschwitz didn’t want to see each other again because they’d all done things they were ashamed of.

Death was certain for people who didn’t have the initiative to do something.

Chronic malnutrition makes it hard to fight infections, and people grow more susceptible to tuberculosis and typhoid.  Once starved enough, antibiotics stop working, so curable illnesses become fatal.  Hunger changes body chemistry to wildly fluctuate resulting in strokes and heart attacks.

The city of Chongjin had always suffered epidemics because its sewage system let untreated feces into streams.  Once electricity stopped working, running water became so unreliable that people stored water in large vats which bred typhoid bacteria.  Between a lack of soap and antibiotics it wasn’t long before typhoid epidemics broke out.

By 1998 about 10% of the population had died from famine, and in some areas 20%, up to 2 million people.  The numbers would have been much higher if North Korea hadn’t received $2.4 billion in food aid between 1996 and 2005.

The North Korean government began to execut people for just about anything: stealing copper wire, goat, corn, or cattle theft, anyone stealing or hoarding or selling grains on the black market, adultery, prostitution, resisting arrest, disorderly conduct, and so on.  Thousands of people were thrown into prisons and many didn’t survive.

Who survived?

People did not passively die.  When the public food distribution ended they did whatever they could figure out to feed themselves.  Some made bucket and string traps to catch small field animals, used nets to catch sparrows, stripped the sweet inner bark of pine trees and ground it into a powder to replace flour. Acorns were mashed into a paste.  Kernels of undigested corn were pulled out of the feces of farm animals.  Shipyard workers scraped the slime off the bottom where food had been stored and dried the foul-smelling goop on roofs to get tiny grains of uncooked rice out.  Others dug shellfish out  and ate seaweed.  When making cornmeal, the husk, cob, leaves and stem were thrown into the grinder. Grass was added to make stews look like they had vegetables.

People rested instead of moving around to preserve their calories.

To stay alive, you had to suppress any impulse to share food.

You had to stop caring, to be able to see a dead body on the street and walk on by, and not stop to help a beloved neighbor’s 5-year-old on the verge of death.  Indifference was a survival skill.

At this point, just about everyone looked at what they owned and could sell to get food. Usually within 5 years most people had run out of possessions to sell, and even sold goods that helped them survive like bicycles for transport or sewing machines to make clothes to sell.

One of the most valuable items a person could own was a hand mill to grind corn, because there was no electricity for electric grinders.  People would come for miles to have their corn ground manually.

Some walked around the edges of their city looking for shellfish, birds, or berries, but most cities were concrete jungles, and people needed to go much further in their search for food.  In the city of Chongjin families hiked 3 miles to a collective orchard to look for fruit that had fallen and rolled under the fence surrounding the orchard.  As food dwindled, children cut school to go to the orchard and squeezed through the wire fence to get fruit.  When there was no more fruit to be scavenged, people went further out from the cities looking not just for food, but for firewood. Farms began to hire armed guards.

Children climbed walls and dug up vegetables and kimchi pots buried in private gardens. As the famine worsened, hungry soldiers began raiding people’s gardens as well.

In smaller towns and villages, people crammed the narrow spaces between homes with peppers, radishes, and cabbages, those with flat roofs put pots of vegetables on top.

Some raised pigs or made tofu.  Many women made cookies because they only took 10 minutes to bake, a lot less time than bread, at a time when firewood and anything else that would burn was hard to find.  Cookies made a quick meal for hungry people on the move.  When many made the same goods, having the best personality counted.

As coal and wood ran out, and electricity very rare, many foods people had made to trade for rice couldn’t be done anymore.

Even dandelions and weeds grew scarce.  Hot pepper, salt, and other flavorings that might have made weeds, ground sawdust, and inner bark flour palatable were expensive.  Oil was unavailable at any price, making cooking even more difficult.  It wasn’t long before North Korea’s frog population was wiped out by over-hunting.  People ate grasshoppers, tadpoles, cicadas, and dogs.

Many hung out at train stations, hoping to go somewhere better.  The homeless began to live at the train stations, most of them children or teenagers, often because the parents and grandparents had starved themselves to death first to keep the children alive. Many orphans roamed fearing others would steal from them, or even eat them, as rumors of cannibalism spread.  Train stations were a place many dead bodies could be found.

Train stations also were full of prostitutes, often young married women desperate to feed their children.   The only payment they asked for was food. Those with apartments nearby could get money or food letting prostitutes briefly rent out a room.

Cities that relied on the falling apart roads and rail lines had to pay the most for food, especially rice, the main staple.

Those with keys to abandoned factories dismantled them and made everything from the machinery to the wood doors into other sell-able products.

Women made sneakers from discarded rubber, built carts from old tires and doors.

Some found books on Oriental medicine and picked mountain herbs.  Doctors performed abortions because families couldn’t afford babies.

Food aid agencies did a survey in the summer of 2008 and found that two-thirds of people were still picking grass and weeds to survive on.

Despite all the crackdowns on the black market, by 2009 there were some who’d made so much money they were becoming almost middle class. Kim Jong-il solved that problem by invalidating the currency in circulation and issuing new bills as a to confiscate the cash people had saved.  The new currency was so worthless that the most money you could convert was $30, instantly throwing anyone who’d done well back into poverty.  The economy crashed even lower, and starvation became common again.

Supply chains broke down

Just about anything you could think of grew scarce –  there were no bricks, cement, glass, or lumber.  When windows broke they were covered with boards or plastic.  Supply chains were broken.  One school, desperate for glass, devised a scheme to sell the famous pottery of their town for salt in Nampo, sell the salt at a profit, and use that money to buy glass from the only factory in North Korea that still made glass.

A clothing factory that made uniforms started to have trouble in 1988 when shipments of fabric were delayed. Sometimes this was because there was no anthracite coal which was a raw material used to make the fabric (vinalon), or there wasn’t electricity at the factory.  Management tried to keep the women busy by sending them out along railroad tracks to collect dog shit for fertilizer. Other days they’d look for scrap metal along the tracks or in the effluent coming out of the pipes at the steelworks.

How to be a Dictator

If you want to be a dictator this book is a good how-to manual.  Kim Il-sung went further than most dictators by fostering a cult of personality that made him into a God so he could harness the power of faith by invoking religious sentiments in the people. He took the cult of personality to an extreme – everyone had to have a photo of him on a blank wall with nothing else, and use a white cloth that could be used for nothing else to keep the photo clean.  Surprise visits of the Public Standards Police ensured this was the case.

He also terrified everyone with the threat of going to prison.

Children didn’t celebrate their own birthdays, only Kim Il-sung and Kim Jong-il’s, whose birthdays were national holidays and often the only time people got meat.  After the energy crisis, these would were the only days when there was electricity, and children got about two pounds of sweets.  Children were expected to stand in front of the portrait while enjoying their treats.

Korean teachers are required to play the accordion to motivate children, or “voluntary hard labor” in the fields or a construction site.

Further Reading

Inside North Korea’s Environmental Collapse. Phil McKenna 06 Mar 2013. pbs.org

Pfeiffer, Dale Allen. 17 Nov 2003. Drawing Lessons from Experience; The Agricultural Crises in North Korea and Cuba. From the Wilderness.

 

 

 

 

 

 

 

 

Posted in Agriculture, Energy Books, North Korea, Oil shock collapse | Tagged , | 1 Comment

Food Rationing

Many nations during war or hard times institute food rationing to make sure there’s enough for everyone and to prevent the connected few from buying up more than their share and selling food at prices several times higher

Venezuela Issues Food Ration Cards

Electronic cards that restrict families to shopping once a week aim to prevent widespread food shortages across country.

4 April 2014    Virginia López. theguardian.com

Venezuelans queued on Friday to register for an ID card that will limit Venezuelans to once-a-week shopping and will set off an alarm if a purchaser breaks the rules. The government wants to prevent shoppers from “over-buying” in a country hit by acute shortages of basic items including milk, sugar and toilet paper and selling them at many times the original price.

By keeping a record of what is purchased and limiting shopping trips, the electronic card is supposed to curb hoarding and prevent speculative shoppers from buying to resell at a profit. But the larger aim is to halt the huge outflow of food to neighboring Colombia, where it sells for up to 10 times as much. It is estimated that almost 40% of Venezuela‘s food is transported illegally across the border.

Outside the Bicentenario megastore in Plaza Venezuela, a middle-class neighbourhood in the capital, Caracas, the line stretches for several blocks. Some of the people here have come to register for the new system; others simply want to buy food. Most of them have already been waiting for several hours. They are desperate over what they say is a lifetime spent standing in queues. The card, they hope, will put an end to a perverse cycle they say they cannot bear for much longer.

“This card will take the edge, the sense of panic, out of shopping. If we know that we will find rice or milk next time we come we don’t need to stock up and so there will be more to go around,” says Oscar Romero, as he orders a cup of coffee from a street vendor to make the wait more pleasant.

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Biomass Electricity More Polluting Than Coal and Waste Incinerators

Trees, Trash, and Toxics: How Biomass Energy Has Become the New Coal

Mary S. Booth, PhD Partnership for Policy Integrity April 2 , 2014

Executive Summary Highlights

Because of a perfect storm of lax regulation and regulatory rollbacks , biomass power plants marketed as “clean” to host communities are increasingly likely to emit toxic compounds like dioxins; heavy metals including lead, arsenic, and mercury; and even emerging contaminants, like phthalates , which are found in the “waste-derived” fuel products that are being approved under new EPA rules.

Permissive emission standards for biomass plants mean that these pollutants can be emitted at higher levels than allowed from actual waste incinerators. As such, it is not a stretch to conclude that biomass plants being permitted throughout the country combine some of the worst emissions characteristics of coal-fired power plants and waste incinerators, all the while professing to be clean and green.

The biomass power industry is undergoing a new surge of growth in the United States. While bioenergy has traditionally been used by certain sectors such as the paper-making industry, more than 70 new wood-burning plants have been built or are underway since 2005, and another 75 proposed and in various stages of development, fueled by renewable energy subsidies and federal tax credits. In most states, biomass power is subsidized along with solar and wind as green, renewable energy, and biomass plant developers routinely tell host communities that biomass power is “clean energy”.

But this first-ever detailed analysis of the bioenergy industry reveals that the rebooted industry is still a major polluter. Comparison of permits from modern coal, biomass, and gas plants shows that a even the “cleanest” biomass plants can emit:

> 150% the nitrogen oxides,
> 600% the volatile organic compounds,
> 190% the particulate matter, and
> 125% the carbon monoxide of a coal plant per megawatt-hour
> 800% the emissions from a natural gas plant for every major pollutant

Biomass power plants are also a danger to the climate, emitting nearly 50% more CO2 per megawatt generated than the next biggest carbon polluter, coal.

Compounding the problem, bioenergy facilities take advantage of gaping loopholes in the Clean Air Act and lax regulation by the EPA and state permitting agencies, which allow them to emit even more pollution.

Our examination of 88 air emissions permits from biomass power plants found:

  • Although biomass power plants emit more pollution than fossil fueled plants, biomass plants are given special treatment and are not held to the same emissions standards. A double standard written into the Clean Air Act allows biomass power plants to emit two and a half times more pollution 250 tons of a criteria pollutant than a coal plant where the threshold is 100 tons before being considered a “major” source that triggers protective measures under the Clean Air Act’s Prevention of Significant Deterioration (PSD) program–even though the pollutants, and their effects, are the same.
  • The biomass power industry is increasingly burning contaminated fuels, blurring the lines between renewable energy that has been portrayed as “clean,” and waste incineration. While most biomass power plants burn forest wood as fuel, the majority of the permits we reviewed also allowed burning waste wood, including construction and demolition debris.
  • EPA rules allow biomass plants to emit more heavy metals and other hazardous air pollutants (HAPs) than both coal plants and waste incinerators. An EPA rollback on regulation that allows more contaminated wastes to be burned as biomass, rather than disposed of in waste incinerators with more restrictive emissions limits on air toxics, will only increase toxic emissions from the bioenergy industry

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Biomass Electricity more polluting than coal

By Partnership for Policy Integrity  04 April 14

iomass electricity generation, a heavily subsidized form of “green” energy that relies primarily on the burning of wood, is more polluting and worse for the climate than coal, according to a new analysis of 88 pollution permits for biomass power plants in 25 states.

Trees, Trash, and Toxics: How Biomass Energy Has Become the New Coal, released this week and delivered to the U.S. Environmental Protection Agency (EPA) by the Partnership for Policy Integrity (PFPI), concludes that biomass power plants across the country are permitted to emit more pollution than comparable coal plants or commercial waste incinerators, even as they are subsidized by state and federal renewable energy dollars. It contains detailed emissions and fuel specifications for a number of facilities, including plants in California, Connecticut, Florida, Georgia, Hawaii, Kentucky, Maine, Massachusetts, New Hampshire, New York, Oregon, Pennsylvania, South Carolina, Texas, Virginia and Washington.

“The biomass power industry portrays their facilities as ‘clean,’” said Mary Booth, director of PFPI and author of the report. “But we found that even the newest biomass plants are allowed to pollute more than modern coal- and gas-fired plants, and that pollution from bioenergy is increasingly unregulated.”

The report found that biomass power is given special treatment and held to lax pollution control standards, compared to fossil-fueled power plants.

Biomass plants are dirty because they are markedly inefficient. The report found that per megawatt-hour, a biomass power plant employing “best available control technology” emits more nitrogen oxides, volatile organic compounds, particulate matter and carbon monoxide than a modern coal plant of the same size.

Almost half the facilities analyzed, however, avoided using BACT by claiming to be “minor” sources of pollution that skim under the triggering threshold for stricter pollution controls. Minor source permits are issued by the states and contain none of the protective measures required under federal air pollution permitting.

“The American Lung Association has opposed granting renewable energy subsidies for biomass combustion precisely because it is so polluting,” said Jeff Seyler, president and CEO of the American Lung Association of the Northeast. “Why we are using taxpayer dollars to subsidize power plants that are more polluting than coal?”

The analysis also found that although wood-burning power plants are often promoted as being good for the climate and carbon neutral, the low efficiency of plants means that they emit almost 50 percent more CO2 than coal per unit of energy produced. Current science shows that while emissions of CO2 from biomass burning can theoretically be offset over time by forest regrowth and other means, such offsets typically take several decades to fully compensate for the CO2 emitted during plant operation. None of the permits analyzed in the report required proof that carbon emissions would be offset.

EPA rules also allow biomass plants to emit more hazardous air pollutants than both coal plants and industrial waste incinerators, including heavy metals and dioxins. Even with these weak rules, most biomass plants avoid restrictions on the amount of toxic air pollution they can emit by claiming to be minor sources, and permits usually require little testing for proof of actual emissions. When regulated as a minor source, a facility is not required to meet any limitations on emissions of hazardous air pollutants.

The potential for biomass power plants to emit heavy metals and other air toxics is increasing, because new EPA rules allow burning more demolition debris and other contaminated wastes in biomass power plants, including, EPA says, materials that are as contaminated as coal. A majority of the facilities reviewed in the report allowed burning demolition debris and other waste wood.

“Lax regulations that allow contaminated wastes to be burned as biomass mean that communities need to protect themselves,” said Mary Booth. “They can’t count on the air permitting process to ensure that bioenergy pollution is minimized.”

Posted in Air, Biomass, Hazardous Waste | Comments Off on Biomass Electricity More Polluting Than Coal and Waste Incinerators