Lawmakers remain concerned about alternative lending products such as payday loans, but they are far from a consensus about what changes are needed. The Senate Banking subcommittee on held a hearing on March 26, soon after the Consumer Financial Protection Bureau (CFPB) released a new study on how consumers use payday loans and the associated risks.
The CFPB says it is close to releasing new industry regulations, but there is still a strong partisan split in Congress over the efficacy and fairness of alternative lending products. Several GOP lawmakers have voiced concern that regulatory efforts could drive short-term lenders out of business. They have also criticized Operation Choke Point -- a Justice Department probe into online lending -- saying the investigation goes beyond illegal activity to try to curb online lending even by those that follow existing rules.
Democrats, however, are concerned about the structure of short-term lending products, including high interest rates and the risk of customers falling into a cycle of debt. They also point out a lack of other options available to borrowers in need of quick cash. Sen. Elizabeth Warren (D-Mass.) still supports a plan for post offices to offer alternative loans to lower-income and rural families in areas with few bank branches. Bank branches, she says, are closing in lower-income neighborhoods and expanding in wealthier areas.