Payday Lending News
The latest news on payday loans and the payday lending industry from the Center for Responsible Lending.
- OCC Targeting Bank Relationships With Payday Lenders
American Banker 21 Mar 2013
Comptroller of the Currency Thomas Curry on March 20 confirmed that his agency is scrutinizing the online and offshore relationships between national banks and payday lenders, with a focus on how certain payday lenders use banks to skirt state laws...
- Payday Loan Bill Hurts the Vulnerable, Helps the Lenders
The Olympian (Olympia, Washington) 21 Mar 2013
Several Washington senators are attempting to reverse the state's restrictions on high-interest payday lending, which would allow lenders to prey on some of the poorest and most vulnerable residents, an editorial warns...
- Lawmakers File Bills on Payday Lending
Denton Record-Chronicle (TX) 21 Mar 2013
Texas Sen. John Corona (R-Dallas) recently introduced Senate Bill 1247 in an attempt to change the way payday lenders operate and how cities can control them. Some say, however, that it is not enough to curtail the problem...
- JPMorgan Chase Is Reining in Payday Lenders
New York Times 20 Mar 2013
New policies will be in place by the end of May to protect JPMorgan Chase customers who have borrowed money from online payday lenders, which automatically withdraw payments from borrowers' bank accounts...
- Unlicensed Payday Lenders Ordered to Stop Lending in Idaho
Idaho Statesman 19 Mar 2013
The Idaho Department of Finance has ordered nine online payday lenders, which are not licensed to do business in the state, to stop making loans there. The companies are based out of countries around the globe -- including the West Indies, New Zealand, and Belize -- according to department officials...
- Actual Costs High for Payday Loans
Denton Record-Chronicle 16 Mar 2013
Consumers who find themselves short of cash may buy into the myth that taking out a quick payday loan is relatively harmless, but research shows that payday loan rates are substantial and risky. Eric Sussman, a professor at the University of California at Los Angeles’ Anderson School of Management, agrees that the annual percentage rate (APR) may seem modest for a two-week loan; but the rate looks a little different when viewed from a yearly perspective...
- Banks Get Warning Payday Loan Withdrawals
American Banker 13 Mar 2013
Banks that let payday lenders make withdrawals from customers' accounts even when the account holders protest could be penalized by regulators, according to industry lawyer Lynne Barr. Payday borrowers often permit lenders to withdraw payments from their checking accounts; but when a borrower requests that the automatic withdrawals be stopped, some banks have let the withdrawals continue unless the payday lender permits otherwise. Barr, a partner at Goodwin Proctor, predicts that federal regulators will take action against banks that let such withdrawals continue. She spoke at the Consumer Bankers Association's conference in Phoenix. One of the subjects of the conference was the mindset of officials at the Consumer Financial Protection Bureau (CFPB). Banks will have to adhere to CFPB recommendations and earn officials' trust to be successful in the future. Add-on products sold to credit card holders and deposit advance loans are other products that the CFPB could soon be looking at more closely.
- Gov. Phil Bryant Gets Bill Permanently Allowing Payday Loans
Gulf Live (Miss.) 09 Mar 2013
The Mississippi state Senate has granted final approval to House Bill 559 -- giving permanent authorization to payday lending, which existing law currently allows to be in place only for two more years. Once signed by Gov. Phil Bryant, the measure would become law immediately. Borrowers in Mississippi can get short-term loans by writing checks that cover the amount borrowed, plus fees. State law gives borrowers 30 days to repay the debt, with fees capped at $20 for every $100 borrowed up to $250. For amounts up to $500, lenders can charge $21.95 per $100 borrowed. This amounts to a 574 percent annual interest rate for a two-week loan. State legislators voted in 2011 to permit payday lenders to operate in the state until 2015, but the Senate proposal would strike the time limit altogether and free Mississippi lawmakers from a requirement to periodically renew the authorization. Sen. Gary Jackson (R-French Camp) pointed out that the federal Consumer Finance Protection Bureau may take over payday regulation, and state lawmakers would no longer have to debate it anyway.
- A Military Pushback on a Legislative Bill Favoring Payday Lender Moneytree
Puget Sound Business Journal 08 Mar 2013
Military officials are protesting a proposed state law that would allow payday lenders to make high-interest, short-term loans in Washington state. The bill would permit short-term loans to buyers without collateral, at interest rates up to 36 percent. Lenders would also be allowed to charge a $225 origination fee on a $1,500 loan, and a monthly maintenance fee of 7.5 percent. Military officials want to make it illegal to extend such high-interest, short-term small loans to military personnel, whether in active duty or reserve. Dennis Bassford, CEO of Seattle-based Moneytree, told lawmakers that the bill would create a safe, transparent product for people seeking short-term loans in a financial emergency and would counteract a black market for online lending. Bruce Neas, staff attorney with Columbia Legal Services, countered that the law would skirt the Military Lending Act's prohibition on payday lending because it technically is not a "payday loan" made against a borrower's checking account. The bill has passed the Senate and awaits a hearing in the House.
- Texas Politicians File Bill to Regulate Payday, Title Loans
The Eagle (TX) 08 Mar 2013
Two Texas legislators have filed bills to impose further regulations on the state's payday and auto title loan lenders. Texas Rep. Mike Villarreal (D-San Antonio) and Sen. John Carona (R-Dallas) filed HB 2706 and SB 1247 -- identical proposals that would limit the size of a short-term loan based on borrowers' income or vehicle value, limit the number of times a loan can be refinanced, and require provisions for extended payment plans. The city councils of Bryan and College Station passed resolutions ahead of the legislative session, asking that payday regulations be tightened. The United Way of The Brazos Valley reports that such lenders are detrimental to moderate- and low-income families. Out of the approximately 14,000 local payday loan transactions that occurred between January and June 2012, borrowers paid a total $1.3 million in fees and 101 vehicles were repossessed. The proposed legislation also includes a requirement that notices be offered in Spanish and that borrowers take out only one loan at a time per lender.
- Bonamici Reintroduces Bill to Fight Online Payday Loans
Portland Business Journal (Oregon) 08 Mar 2013
U.S. Rep. Suzanne Bonamici (D-Ore.) has reintroduced legislation to restrict predatory online payday loans. The bill is a companion to a Senate proposal introduced by U.S. Sen. Jeff Merkley (D-Ore.). Either of these measures, if passed, would close loopholes currently used by online lenders and would enhance enforcement of usury laws that cap interest rates. "Payday lenders can trap consumers in exorbitant loans that lead to increasing debt," Bonamici declared in a news release. A 2011 investigation by the Portland Business Journal found that some online lenders charge up to 1,000 percent interest.
- Consumers Who Turn to Payday Loans May Fall Into Debt Traps
Detroit Free Press 07 Mar 2013
Consumers in Michigan struggling to pay a bill may be tempted to eat the extra cost to take out a payday loan, but many cannot afford to repay. A $42.45 finance charge on a two-week, $300 loan is the equivalent of a 368.91 percent annualized interest rate. Richard Cordray, director of the federal Consumer Financial Protection Bureau, said in February that the fees on short-term loans may seem small but can trap consumers into a cycle of debt if they accumulate and consumers are forced to borrow again to avoid defaulting. About 19 million Americans use payday loans each year, according to the Community Financial Services Association of America, with payback amounts varying by state. "It is highly unrealistic for borrowers to think that they will repay the loan on their next payday," Pew Charitable Trusts said in its "Payday Lending in America" report. While lawmakers discuss possible regulations on payday loans, consumers should honestly ask themselves how quickly they expect to be able to repay a loan.
- Bonamici and Cummings Introduce Bill to Stop Abuse and Fraud in Payday Lending
Albany Tribune (NY) 06 Mar 2013
Legislators in the U.S. House have introduced a companion bill to the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act of 2013, which the Senate proposed in January. The measure -- which would give consumers the power to stop automatic bank withdrawals by payday lenders, sew up loopholes that let lenders dodge state usury laws, and end offshore and other illegal online payday lending -- was introduced by Reps. Suzanne Bonamici (D-Ore.) and Elijah E. Cummings (D-Md.). "Payday lenders routinely prey on hardworking Americans struggling to make ends meet by charging excessive interest rates that trap them in an endless cycle of debt," Cummings stated. "The SAFE Lending Act of 2013 will empower consumers, respect States' rights, help prevent shadow lending, and give State and Federal authorities the tools necessary to combat rogue Internet-based lenders." The SAFE Lending Act is backed by the Center for Responsible Lending, Consumers Union, the National Consumer Law Center, Americans for Financial Reform, the Consumer Federation of America, Consumer Action, U.S. PIRG, and the Conference of State Bank Supervisors.
- Payday Lenders Assail Online Competitors
American Banker 05 Mar 2013
Storefront payday lenders are stepping up their rivalry against online lenders by pushing lawmakers to allow expansion of short-term, high-cost lending in various states, arguing that the alternative is for consumers to engage with a predatory black market. At issue for states mulling changes to payday lending laws is whether outlawing or restricting the products is actually driving prospective storefront customers to online borrowing, where they may face even greater risks. Consumer advocates, meanwhile, argue that state bans on predatory lending have been effective, reducing the overall volume of loans. Research from the Pew Charitable Trusts' Safe Small-Dollar Loans Research Project in 2012 found that the share of adults taking out storefront payday loans was four times as high in states that allow the products as it was in states that ban or tightly regulate them. Although the volume of online lending was higher in states with bans or restrictions, the difference was statistically negligible. "The states that have legalized payday lending -- what do they get? They get more payday loans," remarks Uriah King of the Center for Responsible Lending.
- Bleeding the Borrower Dry
New York Times 04 Mar 2013
Fifteen states, including New York, have banned high-interest payday loans; but offshore lenders increasingly are skirting state laws by issuing these loans online. Some banks in New York profit from these loans by allowing Internet lenders to automatically withdraw payments from the borrower’s account, sometimes without the account holder's permission. Overdrawing on the accounts subsequently allows the banks to collect overdraft fees. Federal law allows bank customers to revoke automatic withdrawal privileges or close an account when they choose. In a federal lawsuit against JPMorgan Chase Bank, one plaintiff claimed that she asked the bank in March 2012 to close her account but that it remained open for two months. In those two months, payday lenders tried to charge her about 55 times, racking up $1,523 in fees. Scenarios like these are not limited to New York, according to a newspaper editorial, which emphasizes the need for action on both the state and federal levels. The Safe Lending Act, currently pending in the U.S. Senate, would require all online lenders to comply with state laws meant to protect customers. Additionally, the editorial concludes, state and federal regulators must ban banks from allowing payday lenders to access automatic payment systems in states where the loans are not permitted.
- Bill for Stricter Laws on Payday Advance Loans
Fox 54 (Huntsville, Ala.) 01 Mar 2013
A trio of organizations in Alabama, including the Southern Poverty Law Center (SPLC), have taken up the cause for more restrictions on payday and title lending in the state. They are proposing a ceiling on annual interest to no more than 36 percent and a limit on the number of loans that borrowers can take out from such lenders. As it stands now, according to the SPLC, payday borrowers can be hit with interest as high as 456 percent and title loan customers can pay as much as 300 percent annual interest. The group says another major concern with the products is that there is no system in place to check how many loans borrowers are getting.
- Payday Loan Bill Would Limit Interest Rates Charged
Lubbock Avalanche-Journal (TX) 28 Feb 2013
The Texas Legislature is responding to the call of city officials statewide, with another attempt to tighten control over payday lenders. These businesses have been accused of preying on people with low incomes, poor credit, and/or no bank accounts. State Rep. Tom Craddick (R-Midland) filed a bill on Feb. 28 that would significantly limit how much interest payday lenders can charge for their short-term loans. Currently, the rates reach as high as 500 percent annually if the borrower fails to repay the debt on time. Part of House Bill 2019 reads, “Lender charges, and any valuable consideration received by the credit services organization, may not exceed the permissible interest and fee and other charges for a similar type of consumer loan." In the past two years, the cities of Austin, Dallas, El Paso, and San Antonio have passed ordinances that restrict payday lenders; but many local officials believe that such laws should be implemented statewide.
- Dimon Pledges to Change JPMorgan’s Practices on Payday Loans
New York Times 27 Feb 2013
Calling the practice "terrible," JPMorgan Chase CEO Jamie Dimon has pledged to revamp how the bank addresses automatic account withdrawals made by Internet-based payday lenders. JPMorgan Chase does not make the loans directly but does enable online payday lenders to deduct payments from customers’ checking accounts, even in the 15 states that prohibit such loans. Sometimes these withdrawals continue even after customers have asked banks to prevent it. More payday lenders are operating online in order to avoid state-based limits on interest rates. Lawmakers also are addressing the issue. In July, Sen. Jeff Merkley (D-Ore.) introduced a bill that would force payday lenders to follow the laws of states where the borrower is located. Part of the bill, pending in Congress, would allow borrowers to more easily halt automatic withdrawals. A new report by the Pew Charitable Trusts, meanwhile, finds that an estimated 27 percent of payday loan borrowers say the loans caused them to overdraw their accounts.
- McCrory Objects to Payday Loan Bill
Winston-Salem Journal (NC) 27 Feb 2013
North Carolina Gov. Pat McCrory is the latest voice added to the chorus of opposition against a bill that would revive payday lending in the state. A spokesperson for the governor said the Senate proposal, which would bring back the short-term borrowing niche after a 10-year hiatus, does not dovetail with McCrory's agenda of reducing the financial burden on North Carolina families. The high-risk loans, spokeswoman Crystal Feldman explained, put households at risk of incurring debt. Under the Senate measure, payday lenders could charge fees of as much as $75 for loans of no more than $500.