Payday Lenders Prey on the Poor, Costing Americans Billions. Will Washington Act?

Christian Science Monitor
September 6, 2011
Robinson, Paheadra

The Senate Banking Committee gathered on Sept. 6 to discuss the confirmation of Richard Cordray, nominated to become the first head of the Consumer Financial Protection Bureau (CFPB). But as President Barack Obama prepares to address the nation on the job crisis, officials at the CFPB are urged to make regulating the payday loan industry a priority. The $30-billion-a-year industry is subject to minimal regulation and commands high interest from the most vulnerable consumers. In today's economically turbulent times, many Americans find themselves paying interest rates of up to 572 percent, as they seek small loans to help them make ends meet on a paycheck-to-paycheck basis. The payday lending industry's lobbying arm, the Community Financial Services Association, boasts that "more than 19 million American households count a payday loan among their choices of short-term credit products." But while the industry has customers of all races, backgrounds, and ages, a February 2011 National People's Action report found that the industry disproportionately affects low-income and minority communities. Overall, the Center for Responsible Lending estimates that predatory payday lending robs Americans of $4.2 billion annually -- largely from those who can least afford it. In recognition of the fact that a loan to cover a small expense should not be a first step down a road to financial ruin for anyone, 17 states -- including Cordray's home state of Ohio -- currently ban or severely limit the practice. Others are considering similar legislation.
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