Payday Lenders Prey on the Poor, Costing Americans Billions. Will Washington Act?
Christian Science Monitor
September 6, 2011
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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