Congressional Representatives Chastise Delay in Payday Loan Rule | Richmond Free Press
Anyone who’s grappling with the rising cost of living knows very well how hard it is to try to stretch your dollars when there are more months than money in the household. Predatory loans, like payday loans and auto loans, compound financial stress with triple-digit interest rates that worsen debt with each renewal. The irony is that many payday loan borrowers who only needed a few hundred dollars end up owing thousands of dollars. And any loan with accrued interest exceeding the principal borrowed is truly predatory.
In recent days, more than 100 members of Congress have spoken out in favor of protecting consumers from these debt trap loans. The effort, led by U.S. Representative Maxine Waters of California, chair of the House Financial Services Committee, called on the Consumer Financial Protection Bureau to do two things: stop delaying the coming into force of the current rule and preserve the requirement. of the existing rule that lenders only grant loans to consumers who can afford to repay them.
The letter of August 23 to the CFPB did not mince words.
“Experts have noted that payday loans often target communities of color, military service members and the elderly,” wrote members of Congress, “charging billions of dollars a year in unaffordable loans to borrowers with a average annual income of $ 25,000 to $ 30,000. “
“The Office of Consumer Affairs’ proposal represents a betrayal of its purpose and statutory objectives of putting consumers first over lenders,” continued the members. “Further, the Bureau offered no new evidence and no rational basis for removing the ability to repay provisions. We believe you should immediately rescind the harmful proposal to rescind the 2017 payday rule. ”
These direct criticisms were reactions to the CFPB’s 15-month delay of a long-awaited consumer-friendly rule that was due to go into effect on August 19.
In today’s controversial Washington, gaining solid support for any pro-consumer issue seems especially difficult. Despite this, the August letter to CFPB director Kathleen Kraninger included representatives from 31 states, including those with some of the highest annual percentage rates on loans across the country. For example, the typical California payday loan has 460% interest and the highest number of signatory states came from California as well: 15.
While no other signatory state has been so numerous, the clear expression of genuine consumer protection against this heinous predatory loan in other areas with rates near or above 400% is remarkable: Texas, 661 %; Wisconsin, 574%; Missouri, 462%; and Illinois, 404 percent.
Yet a closer look at the signatories reveals that despite the strong support expressed in the letter, she only represents about 23% of the entire House of Representatives.
New research on the country’s wealth gap by McKinsey & Company found that 65% of black Americans live in one of 16 states – Alabama, Arkansas, Delaware, Florida, Georgia, Illinois, Louisiana, Maryland, Michigan, Mississippi, New Jersey, New York, North Carolina, South Carolina, Tennessee and Virginia.
Of those 16 states, only Arkansas, Georgia, and North Carolina have rate caps of 36% or less for payday loans. The other 13 states have typical triple-digit interest rates for payday loans, ranging from a low of 304% in Florida to a high of 521% in Mississippi. Several CBC members also represent districts in these states.
Speaking at a House Financial Services Subcommittee hearing on April 30, Diane Standaert, executive vice president and director of state policy at the Center for Responsible Lending, testified as to why payday loans need to be regulated.
“Allowing the 2017 rule to come into effect as planned is the bare minimum that the CFPB should do,” Ms. Standaert said. “It is absurd that we should even have to make such a simple request to an agency whose mission is to protect consumers from unfair, deceptive and abusive financial practices.”
The writer is assistant director of communications at the Center for Responsible Lending.