[Note: More recently-asked question are at the top of this page; a more scripted "What is ICP?" question-and-answer is at the bottom of the page]. Click here to Search This Site
November 2002: As to why ICP and the Fair Finance Watch are challenging HSBC's proposal to acquire the scandal-plagued subprime lender Household International, click here: ICP's HSBC Watch. And click here for a round-up of other publications' coverage of these (HSBC) issues.
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Consumer arcane: Question: My credit card company just sent me a notice, along with my monthly bill, saying I no longer have the right to sue them, but can only use mandatory arbitration. Can they do this? Whats it all about? What can I do?
Answer: Many companies -- including credit card issuers -- are trying to limit their customers rights to sue them, or to join class actions against them, by slipping mandatory arbitration clauses into their contracts, or quietly informing their customers of this new contract term, as a near-invisible bill-stuffers. An appeals court in California last year ruled that BankAmerica could not impose mandatory arbitration on customers it had before 1992 (Baddie v. Bank of America, First District Court of Appeals, California, A068753, November 3, 1999, decided). The right to a jury trial is Constitutionally-protected, and taking it away (at least from existing customers) requires more notice and due process than a bill stuffer.
That ruling applies only in California, however. Delaware, the bank-friendly state, recently clarified its law, to specify that banks chartered in the state can amend their agreements with consumers to include mandatory arbitration clauses, and that bill inserts are a permissible way to inform consumers. Bank Ones First USA unit is requiring mandatory arbitration; as is American Express (in every state except California, due to the court decision described above).
While arbitration makes sense in some contexts (say, when agreed to as dispute resolution between two already-sophisticated businesses), it ill-serves consumers. While filing fees for lawsuits are $100 or less in most of the country, a consumer required to arbitrate is often required to pay far more than this to start the arbitration, and then is required to pay a daily fee for the arbitrator, between $600 and $1,600 a day. The complainant gets much less discovery (to see if the problem is a pattern at the company, as Sears and others have been found to illegally continue to try to collect debts discharged in bankruptcy, for example). Most lawyers are no longer willing to take arbitration on a contingency-fee basis.
Congress, currently expressing concern about banks and others sharing and selling of private consumer information, should address this abuse, which is taking away consumers rights. But the bank and credit-card issuer lobby throws money around in Washington -- check out outgoing Senate Banking Committee Chairman Phil Gramm, for historic example. For now, if you have a choice between a credit card or other company which imposes mandatory arbitration, and one that doesnt -- wed suggest going with the one that doesnt take away your right to sue.
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CRArcane: Inner Citys received some questions about how a particular bank loophole works, and how a current Congressional bill would expand the loophole. While dry, heres a fast answer:
Question: what are the implications of a provision to expand the powers of so-called CEBA banks?
Heres a thumb nail sketch of the issue, beginning with what a CEBA bank is.
CEBA stands for Competitive Equality Banking Act, a law passed in 1987. Ironically, CEBA was passed with the stated intent of closing a loop hole. To get around interstate banking restrictions, companies had been setting up non-bank banks. Their argument was, since the Bank Holding Company Act defines a bank as a company which both accepts demand deposits and makes commercial loans, as long as a company did only one of these two things, it was not a bank. Congress supposedly closed the loophole in 1987, but grandfathered in 57 non-bank banks that had been set up. The owners of these grandfathered institutions could keep owning them, without becoming bank holding companies. Thats how, for example, Merrill Lynch came to own a bank.
Through time, CEBA and the non-bank bank loophole was broadened to cover FDIC-insured credit card banks. See Section 2(c)(2)(F) of the Bank Holding Company Act. Through this loophole, a number of other non-traditional companies got into (non-bank) banking. The loophole was supposed to be kept limited by the constraints and growth-limits that were put on CEBA banks.
The Federal Reserve, interestingly enough, has expressed concern about the proposals to expand this loophole, saying it would give the non-traditional owners of CEBA banks an unfair competitive advantage. Some say the Fed is just still sore that companies out-thought the Fed in the years before 1987 -- the Fed doesnt mind loopholes, as long as it controls them.
The Office of the Comptroller of the Currency has said it has no concerns about these two provisions -- many of the CEBA banks are regulated by the OCC. ICP haslearned that since CEBA credit card banks are technically not banks (even though theyre FDIC insured), the OCC allows an existing national bank to acquire a CEBA bank as an operating subsidiary -- thus allow a bank to buy an FDIC-institution with no Bank Merger Act application subject to public comment. An op-sub application is, according to the OCC, not formally subject to public comment. So its a loophole that eats at the already-shrinking scope of the current CRA.
Theres another wrinkle to this loophole: most CEBA banks, while lending nationwide, limit their assessment area to a single MSA where they have their headquarters. Many of these headquarters / shrunken assessment area are in Delaware, Utah, and Arizona. Consecos Green Tree (high interest rate lender, mostly on mobile homes) owns a CEBA bank in South Dakota, that its now trying to convert into a federal savings bank, and move to Las Vegas. Ah, American banking -- the land of the loophole. Until next time...
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Subj: CRA without displacement?
From: [ ]
It was great to read your site and see the good work that people across the country are doing. I found you comments about environmental justice and community reinvestment thoughtful.
Here in Portland Oregon...things are interesting. I live in the King Neighborhood which in 1990 was 65% African American. The city has re-invested in N/NE to promote community development and encouraged large N/NE businesses to do the same. Emanuel Hospital and the Police Dept have had incentive home buying program within N/NE where traditionally most people of color live and now we are seeing a trend of economic & ethnic gentrification in this area.
...Overall there has been a huge shift in the racial and economic profile of this neighborhood towards being middle class and predominately European American. Proportionally, the minority population in Portland is so small that these shifts are pretty significant. A similar things has happened in the Queen Anne district in Seattle.
Do you have any thoughts about how community reinvestment is accomplished with the minority &/or low-income occupants being the financial beneficiaries rather than being the displaced? Have you seen any examples of this that could provide models for other communities?? In the next few months King Neighborhood Assoc is hosting a community process to discuss the types of economic development residents want to see on Martin Luther King Jr. Blvd... Thanks for your time.
ICPs answer: While the Community Reinvestment Act directs banks to fairly serve low- and moderate-income (LMI) neighborhoods rather than LMI people, weve been able to make the argument that the law was passed, in 1977, because banks refused to lend to poor PEOPLE and people of color. Therefore, we try to make the bank regulators see and act on the difference between lending in LMI neighborhoods that serves LMI people, or lending in LMI neighborhoods that in fact has the result of driving LMI people out.
One way to do this is to look at your local banks Community Reinvestment Act examinations, or performance evaluation. You could ask for one at a bank branch (though they might direct you to their central office). Read the exam closely, to see what type of projects the regulators gave the bank CRA credit for -- was it entirely gentrifying-type lending? You can also get banks Home Mortgage Disclosure Act (HMDA) data, from the bank or online (youll find the URL on our Links Page). With this data, you can review banks lending census tract by census tract, and probably figure out if they only lend on middle- or upper-income housing.
Here in the South Bronx its easy to figure this out, because virtually all middle-income housing is new construction -- so youll see a bank that made sixty mortgage all in a cluster (new development), and none in the surrounding area (existing homes, lower income). We raise this to the regulators... [See ICPs Using CRA Page]. Hope this is helpful.
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Q: What IS Inner City Press/Community on the Move? Is it a newspaper or a community group?
A: Yup, its an unwieldy name. Heres how it came about: in 1987, a group of us who were homesteaders here in New York City -- fixing up long abandoned buildings as housing -- decided to create a newspaper, to spread the word that these vacant buildings could be reclaimed as affordable housing before they deteriorated or were demolished. We began Inner City Press / La Prensa del Pueblo, on a mimeograph machine.
Then dozens of people contacted us, asking us to help them organize new homesteading buildings, in the Bronx and Brooklyn. So we started a community group, Community on the Move. When we finally incorporated it, we chose the name(s) Inner City Press / Community on the Move. But people, then and now, generally refer to the group as Inner City Press, or just Inner City. There you have it.
Q: If the group began with homesteading, how did it get into Community Reinvestment Act enforcement? (And, by the way, what the heck IS the Community Reinvestment Act?)
A: As the first few dozen members of our group were starting to fix up abandoned buildings in the Bronx in the last 1980s, we inevitably asked ourselves, Why did these buildings become abandoned in the first place? And, a less historical but more practical question: Why is it so difficult to get loans and property insurance here in the South Bronx? The second question answers the first. Many buildings in inner city area -- not only the South Bronx and Harlem, but on the South Side of Chicago, in Detroit, Los Angeles, D.C., became abandoned because their owners could no longer get affordable property insurance, or loans to fix up or even sell their buildings. Some less responsible (lets say it -- criminal) owners burned their buildings for insurance money. But others simply couldnt keep them up, and stopped repairing them, or let the government take them, for back taxes.
The decisions of banks and insurance companies to refuse to make loans or write policies in certain, usually predominantly minority, areas -- is called redlining. The origin of this word was a practice that some insurance companies and banks engaged in, of drawing a red line on a map around the areas they didnt want to do business in. Redlining was one of the social ills that the Community Reinvestment Act (CRA), passed by Congress in 1977, sought to combat. The CRA provides that banks have a continuing and affirmative duty to meet the credit needs of their whole communities, including low- and moderate-income neighborhoods.
When in the South Bronx in the late 1980s we found that the homesteaders and their neighbors had difficulty getting loans, regardless of their credit histories, we began to look into the Community Reinvestment Act, and how to begin enforcing it here. To make a long story short, we filed successful CRA challenges to banks in 1992, and five in 1994, resulting in commitments of over $100 million in new lending in the South Bronx and Harlem, three new bank branches, and two loan production offices. Since then, weve worked with groups in other cities and states, trying to make CRA enforcement (and the community redevelopment it makes possible) more systematic.
Q: How did ICP go from being a South Bronx Community Reinvestment Act enforcer to working in other areas of the country?
A: After our six successful CRA challenges in New York City in 1994, we began to look at banks which had operations not only here, but in other states. Chase Manhattan, for example -- which, despite the fact that it only has bank branches in the Northeast and Texas, does more mortgage lending in California than in New York (to say nothing of the Bronx). When we looked at Chases lending patterns, by race and income, we decided we needed to take a more systematic approach. And so we began to work with other groups. These groups, in turn, asked for our help in bringing accountability to other mega-banks: Wachovia, Wells Fargo, Bank of America, Washington Mutual (which in late 2001 bought NY-based Dime Savings), Bank One, KeyCorp (which, while based in Cleveland, is big in upstate New York), etc.. We still look closely at New York-based banks, including the colossus, Citigroup, and the chaos-surrounded J.P. Morgan Chase -- but also mid-sized predators like North Fork Bank, and underperforming savings banks like Roslyn Savings and some others we're not ready to name yet. Based outside the U.S., we watch Royal Bank of Canada, Mizuho, and, now more than ever, HSBC.
Our Inner City Public Interest Law Center is taking this work further, including into the fields of insurance, utilities, and telecommunications. We're taken the lead is founding the Fair Finance Watch, which advocates for fair access to credit... globally. But it all began with a mimeographed newspaper, and three homesteading buildings, in the South Bronx in 1987.
Q: What happened with the Inner City Press newspaper? Does this web site replace it?
A: Yes and no. From 1987 to 1994, we published Inner City Press / La Prensa del Pueblo every two months, moving from a mimeograph machine to a regular print shop, but still doing the layout by hand. As our Community Reinvestment Act challenges and other advocacy began to take more and more time, and generate news we needed to get out more frequently than every two months, the newspaper went on a kind of hiatus, appearing periodically, with special issues on the selling off of the Bronx, on environmental justice issues like pesticide plants and incinerators in the Bronx, and investigative journalism as we got more adept at using the Freedom of Information laws (FOIA).
For a long time, we debated whether to shift onto the Internet. Many people raised the fact that our constituency is generally NOT on the Internet, and that wed be forgetting our roots if we made this switch. But after a time, this stance seemed like putting our heads in the stand. All the public libraries in the Bronx, and most libraries in other communities we work in, have public Internet access. Even though one of Inner City Press earlier editorial exhorted people (hyperbolically) to Throw Your TV Set Out the Window (and get more into real life), the advent of technologies like WebTV, and cable television providers providing Internet service, make the technology more accessible. As we got more subscribers in different parts of the country, postage was killing us. Etcetera, etcetera. Long story short -- we are now beginning posting our Inner City Press journalism on this site, and only printing hard copies for street distribution on issues that require this approach.
Q: Whats next?
A: Hey -- we dont like to reveal our plans. This began when we were targeting abandoned buildings for fix-up, and continued into our Community Reinvestment Act advocacy work. Our adversaries all have substantially more money than we do -- what we have is flexibility, a lack of bureaucracy (as well, of course, as the moral high ground). To project what we'll do in the future, consider this more scripted (and chronological) presentation:
To formalize the above-described work, and ICPs emerging environmental and telecommunications advocacy (which has included successful challenges to media mergers), we have founded the Inner City Public Interest Law Center (ICPILC), with ICPs initial executive director becoming the general counsel of the ICPILC.
In 1998, representing the Delaware Community Reinvestment Action Council, ICPILC obtained in one case a commitment of $3 billion in lending to low and moderate income borrowers, and precedent-setting fair lending protections. Later in 1998, ICPILC obtained a commitment of $1 billion in lending to low and moderate income borrowers, and further fair lending commitments, from Charter One of Cleveland, Ohio. ICP is currently engaged in advocacy around various insurance companies applications for savings bank charters, and in questioning the proposed merger of Bankers Trust and Deutsche Bank, based on Bankers Trusts involvement in high interest rate, predatory mortgage lending.
In 1999, ICP won several more important CRA precedents. One involved the investment bank Lehman Brothers, which sought to acquire the failing Delaware Savings Bank with scarcely a CRA plan in place, and while being active in underwriting the mortgage-backed securities of various subprime lenders, including Delta Funding, which was sued by NYS authorities for predatory lending. After ICP's and DCRAC's comments, the OTS encouraged Lehman Brothers to pledge $2.2 billion in low and moderate income lending, and to identify and avoid predatory lending practices, including in the loan pools Lehman does the underwriting for. Another joint ICP / DCRAC protest ended with GMAC pledging $6 billion in low and moderate income lending. ICP advocates for the appropriate application of CRA to Internet banks -- see ICP's Hot Issues page for more. And, since things are too busy to update this much, click here for cites and links to some recent news articles about our work.
ICP is also engaged in a number of open government campaigns, for example against the Federal Reserve Board, for that agencys refusal to comply with the Freedom of Information Act and other rudiments of fair procedures. Click here to view ICPs Freedom of Information guide.
This website has sub-pages on a variety of issues: CRA, insurance redlining, environmental justice, telecommunications advocacy, arts and culture. We welcome your suggestions or comments on this website, or on our work. Click here for five different ways to contact us.
Thank you for your interest. You can, of course, contact us with more questions...
Click here to Search This Site
These pages copyright 1999 - 2003 Inner City Press/Community on the Move, Inc. and Inner City Public Interest Law Center. All rights reserved. For further information, or to request reprint or other permission, contact: Permissions Coordinator, Legal Administration, Inner City Press, P.O. Box 580188, Mount Carmel Station, Bronx, NY 10458. Phone: (718) 716-3540. Fax: (718) 716-3161. E-mail: WebStaff [at] innercitypress.org