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Column: Federal regulators step up their campaign against predatory payday lenders and their rip-offs

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Column: Federal regulators step up their campaign against predatory payday lenders and their rip-offs

In 2017, the federal government was poised to give low-income consumers a respite from the myriad abuses and rip-offs visited on them by the payday lending industry.

The Consumer Financial Protection Bureau, created in 2010 as part of the banking reforms enacted after the 2008 financial meltdown, had completed a five-year project to finalize a rule that would prevent payday and installment lenders from predatory practices such as enticing borrowers into loans they couldn’t afford while extracting a vigorish that would make a Mafia loan shark blush.

Then Donald Trump happened. As president, he installed Mick Mulvaney, his budget director and a former Republican congressman from North Carolina, as the bureau’s acting director. Mulvaney effectively canceled the new rule on Jan. 16, 2018, the day it was to go into effect.

A payday advance that is repaid on payday is a payday loan, and fintech cash advance apps that call themselves ‘earned wage access’ are just high-cost lending in disguise.

— Lauren Saunders, National Consumer Law Center

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Two days later, Mulvaney withdrew a lawsuit in Kansas state court that had charged four lenders with saddling borrowers with annual interest rates as high as 950%. And he closed an investigation into a lender that had contributed to his political campaign.

In the words of Sen. Elizabeth Warren (D-Mass.) — who had pushed for the creation of the CFPB — these actions “unwound years of careful CFPB work — all to benefit an industry that has close ties to Mr. Mulvaney and that has contributed more than $60,000 to his political campaigns.”

Mulvaney, absurdly, redirected the agency away from its purpose of consumer protection: “We work for the people,” he told its employees. “And that means everyone: those who use credit cards, and those who provide those cards; those who take loans, and those who make them; those who buy cars, and those who sell them.”

In other words, the CFPB would be protecting not only consumers but those who take advantage of consumers.

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It now looks as if the cop is back on the beat. On July 18, the bureau proposed a new rule making clear that payday advances are loans within the definition of the federal Truth in Lending Act, meaning that companies have to fully disclose all the costs and fees to borrowers — before the borrowers sign any loan documents.

“When interest rates and fees on these loans are high, this can lead to a treadmill of debt that keeps getting faster and faster,” CFPB Director Rohit Chopra said in announcing the new rule.

The bureau also has returned to court. On May 17, it sued L.A.-based lending marketplace SoLo Funds in federal court in Los Angeles, asserting that the firm’s “advertising and disclosures … falsely tout no-interest loans when, in fact, consumers are routinely subject to fees that result in an exorbitant total cost of credit.” When the fees are toted up, the agency says, the true annualized interest rate on the loans can be more than 300%.

SoLo hasn’t yet responded to the allegations in court and didn’t reply to my emailed request for comment.

The bureau has been energized in part by a Supreme Court decision that lifted a shadow over its future. This was a lawsuit brought by some of the targeted lenders contending that the bureau was unconstitutional because it was funded by the Federal Reserve System rather than through congressional appropriations.

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Several pending CFPB cases had been placed on hold while the Supreme Court pondered the appropriations issue. But the court ruled in the CFPB’s favor on May 16 in a 7-2 decision written by Justice Clarence Thomas.

Among those cases was a federal lawsuit the bureau filed in July 2022 against Texas-based ACE Cash Express, which then operated out of nearly 1,000 storefronts in 22 states, including California. The CFPB charged that when ACE borrowers said they were unable to pay back their existing loans, ACE offered them repayment plans bearing new fees but sometimes didn’t tell them a no-fee option was available in some states.

ACE already was subject to a 2014 consent order in which it agreed to pay a $5-million penalty and $5 million in customer restitution, and pledged to offer customers a refinancing of their loans as well as the free option. “ACE has not done as it pledged,” the CFPB charged in its lawsuit.

ACE responded to the lawsuit by citing the case then headed to the Supreme Court. “The days of the Bureau’s unchecked administrative agency power … are, hopefully, over,” its lawyers wrote. “Because the CFPB itself is unconstitutional,” the case should be dismissed, they argued. The trial court put the case on hold, but with the Supreme Court ruling, the case is back on the docket, with briefs due at the trial court over the next two months.

The Supreme Court ruling was long overdue. In the years since Mulvaney tore up the CFPB’s project against payday and installment lenders, that industry underwent a troubling transformation.

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Once operating out of storefronts where customers could cash their paychecks for a fee, it had grown more sophisticated. Customers could now take loans as advances on their paychecks but typically had to provide the lenders with links to their bank accounts so that repayments could be drawn directly from those accounts.

The industry now styled its products as “earned wage access” providers. The firms today have innocuous, homely names such as Dave.com and Brigit; their websites are adorned with stock photos of young people and families evidently basking in the relief of a short-term financial crisis averted. Some claim to charge zero interest on their short-term loans, but that’s misleading.

One should respect the financial tightrope walked by many low-wage households living paycheck to paycheck. The CFPB knows this market; its proposed rule acknowledges that “a significant driver of demand for consumer credit … derives from the mismatch between when a family receives income and when a family must make payments for expenses.” Meanwhile, “employers have a strong incentive to delay the payment of compensation to workers, which drives demand for short-term credit.”

When the true cost of that credit is hidden from the borrowers or they’re forced to refinance, incurring multiple fees, that’s a problem the CFPB was born to address.

“A payday advance that is repaid on payday is a payday loan, and fintech cash advance apps that call themselves ‘earned wage access’ are just high-cost lending in disguise,” Lauren Saunders, associate director of the National Consumer Law Center, says on the center’s website. “The CFPB has seen through fintech payday lenders’ new clothes.”

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Some firms have made deals with employers such as Walmart, Amazon, Uber, Lyft and Kroger to provide advances to workers to be repaid from their next paycheck. In 2022, the CFPB says, more than 7 million workers accessed about $22 billion via these employer-lender partnerships. According to a survey cited by the bureau, most users of paycheck advance services fall below the federal poverty line and more than 80% are hourly or gig workers.

The chief constant tying the new system to the old is fees. About 90% of workers paid a fee for the advances in 2022, averaging about $3.18 per transaction. Since most took out repeated advances, the average annual cost was almost $69.

The CFPB found that among the fees most prevalent in the wage-advance sector are those charged for “expedited” access to cash — which after all is the goal of resorting to paycheck advances in the first place.

But new kinds of fees have appeared. One is often described by the finance firms as “tips” — solicited from borrowers in acknowledgment of the service they’re being provided or to defray the cost the firms ostensibly incur by lending out at 0%.

Those are among the issues in the CFPB’s lawsuit against SoLo. The firm functions as a sort of loan broker — needy customers apply for loans, and other customers provide the loans after judging an applicant’s creditworthiness. (“Earn money with your money,” SoLo tells these small-money lenders on its website. “You lend money to other members to help them replace a tire, cover a bill or for any other reason. They pay you back and add a voluntary tip as a sign of appreciation.”)

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The maximum loan is $575. Borrowers can set a repayment date that is less than a month away; if repayment isn’t made after 35 days, the bureau says, SoLo charges a late fee.

The CFPB says the tips aren’t really “voluntary” at all; lenders tend to judge loan applications based on the size of the “tip” being offered, as SoLo suggests. SoLo also prompts applicants to select among three default “donation” fees that go directly to the firm.

None of the defaults is for $0, and borrowers can’t click to the next page without making a choice. Customers can opt for a $0 donation, but only by finding the option in another part of SoLo’s mobile app as though by accident.

“Virtually all consumers who receive loans incur a Lender tip fee, a Solo donation fee, or both,” the CFPB alleges.

It’s proper to note that this isn’t SoLo’s first rodeo. Last year, the California Department of Financial Protection and Innovation reached a consent agreement with the firm over some of the same practices targeted by the CFPB; SoLo paid a penalty of $50,000 and committed to reimbursing its California customers for their “donations.”

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Also last year the District of Columbia settled its own case against SoLo, in which it alleged that despite advertising no-interest, no-fee loans, the firm compelled “nearly all borrowers to provide monetary ‘tips’ and ‘donations’” that effectively drove up the annualized interest rates to more than 500%, well beyond the district’s 24% usury limit. SoLo paid a $30,000 penalty and pledged that lenders would no longer be able to know that a borrower had offered a tip or how much it would be.

And in 2022, Connecticut authorities imposed a $100,000 penalty on SoLo and required it to reimburse Connecticut customers for all “tips,” “donations,” late fees and other charges. SoLo was barred from the lending business in that state without obtaining any required license.

The battle against predatory lending to small borrowers isn’t over. Project 2025, the right-wing document designed as a manifesto of the Trump presidential campaign, has targeted the CFPB for extermination, calling it “a highly politicized, damaging, and utterly unaccountable federal agency.” The manifesto says “the next conservative President should order the immediate dissolution of the agency.”

(The document was written before the Supreme Court ruled in the CFPB’s favor, so it takes the agency’s unconstitutionality as gospel.)

The specter of rampant Mulvaneyism still lurks on the horizon in a Republican administration: taking government off the backs of the people, so predatory businesses can again saddle up.

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Commentary: A leading roboticist punctures the hype about self-driving cars, AI chatbots and humanoid robots

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Commentary: A leading roboticist punctures the hype about self-driving cars, AI chatbots and humanoid robots

It may come to your attention that we are inundated with technological hype. Self-driving cars, human-like robots and AI chatbots all have been the subject of sometimes outlandishly exaggerated predictions and promises.

So we should be thankful for Rodney Brooks, an Australian-born technologist who has made it one of his missions in life to deflate the hyperbole about these and other supposedly world-changing technologies offered by promoters, marketers and true believers.

As I’ve written before, Brooks is nothing like a Luddite. Quite the contrary: He was a co-founder of IRobot, the maker of the Roomba robotic vacuum cleaner, though he stepped down as the company’s chief technology officer in 2008 and left its board in 2011. He’s a co-founder and chief technology officer of RobustAI, which makes robots for factories and warehouses, and former director of computer science and artificial intelligence labs at Massachusetts Institute of Technology.

Having ideas is easy. Turning them into reality is hard. Turning them into being deployed at scale is even harder.

— Rodney Brooks

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In 2018, Brooks published a post of dated predictions about the course of major technologies and promised to revisit them annually for 32 years, when he would be 95. He focused on technologies that were then — and still are — the cynosures of public discussion, including self-driving cars, human space travel, AI bots and humanoid robots.

“Having ideas is easy,” he wrote in that introductory post. “Turning them into reality is hard. Turning them into being deployed at scale is even harder.”

Brooks slotted his predictions into three pigeonholes: NIML, for “not in my lifetime,” NET, for “no earlier than” some specified date, and “by some [specified] date.”

On Jan. 1 he published his eighth annual predictions scorecard. He found that over the years “my predictions held up pretty well, though overall I was a little too optimistic.”

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For example in 2018 he predicted “a robot that can provide physical assistance to the elderly over multiple tasks [e.g., getting into and out of bed, washing, using the toilet, etc.]” wouldn’t appear earlier than 2028; as of New Year’s Day, he writes, “no general purpose solution is in sight.”

The first “permanent” human colony on Mars would come no earlier than 2036, he wrote then, which he now calls “way too optimistic.” He now envisions a human landing on Mars no earlier than 2040, and the settlement no earlier than 2050.

A robot that seems “as intelligent, as attentive, and as faithful, as a dog” — no earlier than 2048, he conjectured in 2018. “This is so much harder than most people imagine it to be,” he writes now. “Many think we are already there; I say we are not at all there.” His verdict on a robot that has “any real idea about its own existence, or the existence of humans in the way that a 6-year-old understands humans” — “Not in my lifetime.”

Brooks points out that one way high-tech promoters finesse their exaggerated promises is through subtle redefinition. That has been the case with “self-driving cars,” he writes. Originally the term referred to “any sort of car that could operate without a driver on board, and without a remote driver offering control inputs … where no person needed to drive, but simply communicated to the car where it should take them.”

Waymo, the largest purveyor of self-driven transport, says on its website that its robotaxis are “the embodiment of fully autonomous technology that is always in control from pickup to destination.” Passengers “can sit in the back seat, relax, and enjoy the ride with the Waymo Driver getting them to their destination safely.”

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Brooks challenges this claim. One hole in the fabric of full autonomy, he observes, became clear Dec. 20, when a power blackout blanketing San Francisco stranded much of Waymo’s robotaxi fleet on the streets. Waymos, which can read traffic lights, clogged intersections because traffic lights went dark.

The company later acknowledged its vehicles occasionally “require a confirmation check” from humans when they encounter blacked-out traffic signals or other confounding situations. The Dec. 20 blackout, Waymo said, “created a concentrated spike in these requests,” resulting in “a backlog that, in some cases, led to response delays contributing to congestion on already-overwhelmed streets.”

It’s also known that Waymo pays humans to physically deal with vehicles immobilized by — for example — a passenger’s failure to fully close a car door when exiting. They can be summoned via the third-party app Honk, which chiefly is used by tow truck operators to find stranded customers.

“Current generation Waymos need a lot of human help to operate as they do, from people in the remote operations center to intervene and provide human advice for when something goes wrong, to Honk gig workers scampering around the city,” Brooks observes.

Waymo told me its claim of “fully autonomous” operation is based on the fact that the onboard technology is always in control of its vehicles. In confusing situations the car will call on Waymo’s “fleet response” team of humans, asking them to choose which of several optional paths is the best one. “Control of the vehicle is always with the Waymo Driver” — that is, the onboard technology, spokesman Mark Lewis told me. “A human cannot tele-operate a Waymo vehicle.”

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As a pioneering robot designer, Brooks is particularly skeptical about the tech industry’s fascination with humanoid robots. He writes from experience: In 1998 he was building humanoid robots with his graduate students at MIT. Back then he asserted that people would be naturally comfortable with “robots with humanoid form that act like humans; the interface is hardwired in our brains,” and that “humans and robots can cooperate on tasks in close quarters in ways heretofore imaginable only in science fiction.”

Since then it has become clear that general-purpose robots that look and act like humans are chimerical. In fact in many contexts they’re dangerous. Among the unsolved problems in robot design is that no one has created a robot with “human-like dexterity,” he writes. Robotics companies promoting their designs haven’t shown that their proposed products have “multi-fingered dexterity where humans can and do grasp things that are unseen, and grasp and simultaneously manipulate multiple small objects with one hand.”

Two-legged robots have a tendency to fall over and “need human intervention to get back up,” like tortoises fallen on their backs. Because they’re heavy and unstable, they are “currently unsafe for humans to be close to when they are walking.”

(Brooks doesn’t mention this, but even in the 1960s the creators of “The Jetsons” understood that domestic robots wouldn’t rely on legs — their robot maid, Rosie, tooled around their household on wheels, a perception that came as second nature to animators 60 years ago but seems to have been forgotten by today’s engineers.)

As Brooks observes, “even children aged 3 or 4 can navigate around cluttered houses without damaging them. … By age 4 they can open doors with door handles and mechanisms they have never seen before, and safely close those doors behind them. They can do this when they enter a particular house for the first time. They can wander around and up and down and find their way.

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“But wait, you say, ‘I’ve seen them dance and somersault, and even bounce off walls.’ Yes, you have seen humanoid robot theater. “

Brooks’ experience with artificial intelligence gives him important insights into the shortcomings of today’s crop of large language models — that’s the technology underlying contemporary chatbots — what they can and can’t do, and why.

“The underlying mechanism for Large Language Models does not answer questions directly,” he writes. “Instead, it gives something that sounds like an answer to the question. That is very different from saying something that is accurate. What they have learned is not facts about the world but instead a probability distribution of what word is most likely to come next given the question and the words so far produced in response. Thus the results of using them, uncaged, is lots and lots of confabulations that sound like real things, whether they are or not.”

The solution is not to “train” LLM bots with more and more data, in the hope that eventually they will have databases large enough to make their fabrications unnecessary. Brooks thinks this is the wrong approach. The better option is to purpose-build LLMs to fulfill specific needs in specific fields. Bots specialized for software coding, for instance, or hardware design.

“We need guardrails around LLMs to make them useful, and that is where there will be lot of action over the next 10 years,” he writes. “They cannot be simply released into the wild as they come straight from training. … More training doesn’t make things better necessarily. Boxing things in does.”

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Brooks’ all-encompassing theme is that we tend to overestimate what new technologies can do and underestimate how long it takes for any new technology to scale up to usefulness. The hardest problems are almost always the last ones to be solved; people tend to think that new technologies will continue to develop at the speed that they did in their earliest stages.

That’s why the march to full self-driving cars has stalled. It’s one thing to equip cars with lane-change warnings or cruise control that can adjust to the presence of a slower car in front; the road to Level 5 autonomy as defined by the Society of Automotive Engineers — in which the vehicle can drive itself in all conditions without a human ever required to take the wheel — may be decades away at least. No Level 5 vehicles are in general use today.

Believing the claims of technology promoters that one or another nirvana is just around the corner is a mug’s game. “It always takes longer than you think,” Brooks wrote in his original prediction post. “It just does.”

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Versant launches, Comcast spins off E!, CNBC and MS NOW

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Versant launches, Comcast spins off E!, CNBC and MS NOW

Comcast has officially spun off its cable channels, including CNBC and MS NOW, into a separate company, Versant Media Group.

The transaction was completed late Friday. On Monday, Versant took a major tumble in its stock market debut — providing a key test of investors’ willingness to hold on to legacy cable channels.

The initial outlook wasn’t pretty, providing awkward moments for CNBC anchors reporting the story.

Versant fell 13% to $40.57 a share on its inaugural trading day. The stock opened Monday on Nasdaq at $45.17 per share.

Comcast opted to cast off the still-profitable cable channels, except for the perennially popular Bravo, as Wall Street has soured on the business, which has been contracting amid a consumer shift to streaming.

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Versant’s market performance will be closely watched as Warner Bros. Discovery attempts to separate its cable channels, including CNN, TBS and Food Network, from Warner Bros. studios and HBO later this year. Warner Chief Executive David Zaslav’s plan, which is scheduled to take place in the summer, is being contested by the Ellison family’s Paramount, which has launched a hostile bid for all of Warner Bros. Discovery.

Warner Bros. Discovery has agreed to sell itself to Netflix in an $82.7-billion deal.

The market’s distaste for cable channels has been playing out in recent years. Paramount found itself on the auction block two years ago, in part because of the weight of its struggling cable channels, including Nickelodeon, Comedy Central and MTV.

Management of the New York-based Versant, including longtime NBCUniversal sports and television executive Mark Lazarus, has been bullish on the company’s balance sheet and its prospects for growth. Versant also includes USA Network, Golf Channel, Oxygen, E!, Syfy, Fandango, Rotten Tomatoes, GolfNow, GolfPass and SportsEngine.

“As a standalone company, we enter the market with the scale, strategy and leadership to grow and evolve our business model,” Lazarus, who is Versant’s chief executive, said Monday in a statement.

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Through the spin-off, Comcast shareholders received one share of Versant Class A common stock or Versant Class B common stock for every 25 shares of Comcast Class A common stock or Comcast Class B common stock, respectively. The Versant shares were distributed after the close of Comcast trading Friday.

Comcast gained about 3% on Monday, trading around $28.50.

Comcast Chairman Brian Roberts holds 33% of Versant’s controlling shares.

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Ties between California and Venezuela go back more than a century with Chevron

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Ties between California and Venezuela go back more than a century with Chevron

As a stunned world processes the U.S. government’s sudden intervention in Venezuela — debating its legality, guessing who the ultimate winners and losers will be — a company founded in California with deep ties to the Golden State could be among the prime beneficiaries.

Venezuela has the largest proven oil reserves on the planet. Chevron, the international petroleum conglomerate with a massive refinery in El Segundo and headquartered, until recently, in San Ramon, is the only foreign oil company that has continued operating there through decades of revolution.

Other major oil companies, including ConocoPhillips and Exxon Mobil, pulled out of Venezuela in 2007 when then-President Hugo Chávez required them to surrender majority ownership of their operations to the country’s state-controlled oil company, PDVSA.

But Chevron remained, playing the “long game,” according to industry analysts, hoping to someday resume reaping big profits from the investments the company started making there almost a century ago.

Looks like that bet might finally pay off.

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In his news conference Saturday, after U.S. Special Forces snatched Venezuelan President Nicolás Maduro and his wife in Caracas and extradited them to face drug-trafficking charges in New York, President Trump said the U.S. would “run” Venezuela and open more of its massive oil reserves to American corporations.

“We’re going to have our very large U.S. oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country,” Trump said during a news conference Saturday.

While oil industry analysts temper expectations by warning it could take years to start extracting significant profits given Venezuela’s long-neglected, dilapidated infrastructure, and everyday Venezuelans worry about the proceeds flowing out of the country and into the pockets of U.S. investors, there’s one group who could be forgiven for jumping with unreserved joy: Chevron insiders who championed the decision to remain in Venezuela all these years.

But the company’s official response to the stunning turn of events has been poker-faced.

“Chevron remains focused on the safety and well-being of our employees, as well as the integrity of our assets,” spokesman Bill Turenne emailed The Times on Sunday, the same statement the company sent to news outlets all weekend. “We continue to operate in full compliance with all relevant laws and regulations.”

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Turenne did not respond to questions about the possible financial rewards for the company stemming from this weekend’s U.S. military action.

Chevron, which is a direct descendant of a small oil company founded in Southern California in the 1870s, has grown into a $300-billion global corporation. It was headquartered in San Ramon, just outside of San Francisco, until executives announced in August 2024 that they were fleeing high-cost California for Houston.

Texas’ relatively low taxes and light regulation have been a beacon for many California companies, and most of Chevron’s competitors are based there.

Chevron began exploring in Venezuela in the early 1920s, according to the company’s website, and ramped up operations after discovering the massive Boscan oil field in the 1940s. Over the decades, it grew into Venezuela’s largest foreign investor.

The company held on over the decades as Venezuela’s government moved steadily to the left; it began to nationalize the oil industry by creating a state-owned petroleum company in 1976, and then demanded majority ownership of foreign oil assets in 2007, under then-President Hugo Chávez.

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Venezuela has the world’s largest proven crude oil reserves — meaning they’re economical to tap — about 303 billion barrels, according to the U.S. Energy Information Administration.

But even with those massive reserves, Venezuela has been producing less than 1% of the world’s crude oil supply. Production has steadily declined from the 3.5 million barrels per day pumped in 1999 to just over 1 million barrels per day now.

Currently, Chevron’s operations in Venezuela employ about 3,000 people and produce between 250,000 and 300,000 barrels of oil per day, according to published reports.

That’s less than 10% of the roughly 3 million barrels the company produces from holdings scattered across the globe, from the Gulf of Mexico to Kazakhstan and Australia.

But some analysts are optimistic that Venezuela could double or triple its current output relatively quickly — which could lead to a windfall for Chevron.

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The Associated Press contributed to this report.

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