DURHAM, NC — Ignoring the voices of families and communities who have worked for many years for relief from the harms of predatory payday lending, a handful of members of Congress have introduced legislation that would nullify the Consumer Financial Protection Bureau’s (Consumer Bureau) national rule to rein in payday lending abuses. Their legislation uses Congressional Review Act authority to repeal the rule and prevent the Consumer Bureau from issuing a similar rule in the future, giving payday and car title lenders a free pass.
This legislation, introduced by Rep. Dennis Ross (R-Fla.) and co-sponsored by Rep. Alcee Hastings (D-Fla.), Tom Graves (R-Ga.), Henry Cuellar (D-Texas), Steve Stivers (R-Ohio), and Collin Peterson (D-Minn.), would kill the first ever national payday rule that requires payday and car title lenders to make a loan only after they have determined that the borrower can afford to pay it back. This is a commonsense measure designed to protect people from being trapped for months and sometimes years in triple-digit payday and car title loans.
“There’s no middle ground on whether the Consumer Bureau’s payday rule should stand. Congress must leave it alone. Payday lending causes tremendous harm to working families as well as vulnerable seniors and veterans. North Carolina recognized these harms years ago, and since 2001 our legislature has rejected repeated attempts to weaken our good laws,” said Alfred Ripley of the NC Justice Center. “In states without strong interest rate caps, payday and car title lenders trap people in loans with 300% or 400% interest, leading to cascading financial problems.”
“Payday loans rob borrowers of their ability to recover from a financial shortfall by pulling them deeper into debt. Borrowers routinely end up with unpaid bills and overdraft fees. Some lose their bank accounts or file bankruptcy,” said Donna Gallagher of the NC Assets Alliance. “Members of Congress should be working to protect families across the country by passing a strong national interest rate cap, not rolling back these initial protections just released by the Consumer Bureau.”
“North Carolina is proud to be among the 15 states plus D.C. that have eliminated payday lending, and our lawmakers must continue to stand by these strong state protections,” said Kelly Tornow of the Center for Responsible Lending. “But Congress must let this payday rule go into effect. Payday lending is far from the lifeline some members of Congress called it when they introduced this disastrous bill. It is a trap that routinely makes people much worse off. Congress must stand with working families, not predators.”
“I applaud the Consumer Bureau’s new payday rule, which starts from the common-sense principle of making sure the borrower has the ability to repay. Congress should advocate for principles that reflect an ethical approach to lending money,” said Jennifer Copeland of the NC Council of Churches. “Reasonable interest rates are one thing, but God does not look kindly on taking advantage of those struggling financially by charging them outrageous interest rates. The structure of these loans creates borrowers in bondage, enslaved by fees and interest they can never repay.”
“The Department of Defense recognizes the dangers caused by payday and other high-cost loans and their impact on military readiness. In 2006, Congress passed a 36% interest rate cap to protect active duty military and their families,” said Larry Hall, Secretary of the NC Department of Military and Veterans Affairs. “This payday rule is a good first step, and Congress should support it. Congress should also enact an interest rate cap to protect all Americans, including the more than 21 million veterans who do not receive Military Lending Act safeguards.”
A coalition of over 750 civil rights, consumer, labor, faith, veterans, seniors and community organizations from all 50 states energized a years-long effort to push the Consumer Bureau for strong protections from predatory payday and car title lending. The business model relies on repeat borrowing of unaffordable loans; 75% of all payday loan fees are generated from borrowers stuck in more than 10 loans a year.
Payday and car title lending leaves people without funds to pay bills, strips them of their bank accounts, and increases their likelihood of bankruptcy. Across the country, payday and car title lending costs families $8 billion per year. On the contrary, in the 15 states and D.C. where these loans are illegal, families save $5 billion every year. This rule will help spread these savings all across the country, keeping money in the pockets of hard working families and seniors.
The Consumer Bureau's rule is supported by more than 70% of Republicans, Independents and Democrats. (PDF)
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Carol Hammerstein at email@example.com.