facebook linkedin twitter

State Attorneys General Boost U.S. House Payday Lender Bill

May 28, 2019 by Tom Ramstack
State Attorneys General Boost U.S. House Payday Lender Bill

WASHINGTON – Twenty-five state attorneys general are giving a boost to a bill introduced in Congress this month that seeks to rein in excessive interest rates on payday loans.

The attorneys general filed a comment letter with the Consumer Financial Protection Bureau opposing the agency’s proposed repeal of rules it adopted in 2017 to protect consumers from excessive interest rates and other predatory practices.

The letter argues that eliminating the protections, which were set to go into effect in August 2019, would harm consumers and reduce states’ ability to protect their residents from predatory lending. It also says the planned repeal is inconsistent with the CFPB’s legal obligations.

“The proposal also neglects the experiences of states that have successfully curbed abuses associated with payday and vehicle title lending without hurting consumers,” the letter says.

District of Columbia Attorney General Karl Racine, who helped organize the joint letter, added in a statement, “Rolling back consumer protections on high-interest short-term loans will trap low and middle income borrowers in endless cycles of debt.”

Payday loans are high-interest, short-term loans that must be paid in full when borrowers receive their next paychecks. The lenders who grant them often are called loan sharks.

Days before the attorneys general sent the letter, Democrats introduced a bill in Congress that would cap the interest rates that credit card companies and payday lenders can charge consumers at 15 percent.

The Loan Shark Prevention Act also would allow the postal service to perform some financial functions, such as check-cashing and allowing customers to pay bills through the postal service. Payments through the postal service are intended to eliminate profiteering by intermediaries, such as payday lenders.

Some Republicans are joining Democrats in supporting the bill.

“The bill will officially cap all interest rates on consumer loans at 15 percent, lowering the credit card rates of millions of Americans and functionally destroying the predatory ‘payday’ loan industry,” a statement from Representative Alexandria Ocasio-Cortez, D-N.Y, said. She introduced the bill along with Senator Bernie Sanders, I-Vt., who is running for president.

Credit card interest rates now average as much as 19.24 percent, according to a recent WalletHub’s Credit Card Landscape Report. The rates have been increasing in recent years as the Federal Reserve Bank raises the target rate.

Predatory lending has trapped “millions in a cycle of systemic poverty as their hard-earned money is funneled into exorbitant bonuses for Wall Street executives,” the statement from Ocasio-Cortez says. She is a member of the House Financial Services Committee.

Critics of the legislation say it would hurt credit card companies’ profits and force them to cut out loyalty rewards programs and other popular perks for customers.

Ultimately, it would end up costing consumers more money than it saves them, according to corporate financial advisor Karen Webster.

“Every time governments try to implement price controls to prevent market-based prices from balancing supply and demand, they eventually experience the law of unintended consequences,” Webster wrote in a recent editorial posted on the website Pymnts.com.

She mentioned the example of gasoline price caps the federal government imposed during an oil shortage crisis in 1973.

“So who got hurt the most,” Webster asked. “Not the oil companies, and not the gas station operators. It was the average, hard-working consumers who were ‘supposed to’ have benefited from not having to pay ‘exorbitant’ prices.

“But, of course, they paid – just in a myriad of other ways, including even losing their jobs,” she wrote.

A+
a-

In The News

Health

Voting

Shkreli Ordered to Return $64M, is Barred from Drug Industry

NEW YORK (AP) — Martin Shkreli must return $64.6 million in profits he and his former company reaped from jacking... Read More

NEW YORK (AP) — Martin Shkreli must return $64.6 million in profits he and his former company reaped from jacking up the price and monopolizing the market for a lifesaving drug, a federal judge ruled Friday while also barring the provocative, imprisoned ex-CEO from the pharmaceutical... Read More

White House: Russia Prepping Pretext for Ukraine Invasion

WASHINGTON (AP) — U.S. intelligence officials have determined a Russian effort is underway to create a pretext for its troops... Read More

WASHINGTON (AP) — U.S. intelligence officials have determined a Russian effort is underway to create a pretext for its troops to further invade Ukraine, and Moscow has already prepositioned operatives to conduct "a false-flag operation" in eastern Ukraine, according to the White House. White House press... Read More

Second Gentleman Emhoff Acts as Public Link to White House

WASHINGTON (AP) — As America's first second gentleman, Doug Emhoff has attended a U.S. naturalization ceremony in New York, dished... Read More

WASHINGTON (AP) — As America's first second gentleman, Doug Emhoff has attended a U.S. naturalization ceremony in New York, dished up spaghetti and chocolate milk to kids at a YMCA near New Orleans and reminisced with second graders in Detroit about an early job at McDonald's.... Read More

Governors Turn to Budgets to Guard Against Climate Change

SACRAMENTO, Calif. (AP) — Their state budgets flush with cash, Democratic and Republican governors alike want to spend some of... Read More

SACRAMENTO, Calif. (AP) — Their state budgets flush with cash, Democratic and Republican governors alike want to spend some of the windfall on projects aimed at slowing climate change and guarding against its consequences, from floods and wildfires to dirty air.  Democratic governors such as California's... Read More

Volcano Erupts in Pacific, West Coast Under Tsunami Advisory

WELLINGTON, New Zealand (AP) — An undersea volcano erupted in spectacular fashion Saturday near the Pacific nation of Tonga, sending... Read More

WELLINGTON, New Zealand (AP) — An undersea volcano erupted in spectacular fashion Saturday near the Pacific nation of Tonga, sending large tsunami waves crashing across the shore and people rushing to higher ground. A tsunami advisory was in effect for Hawaii, Alaska and the U.S. Pacific... Read More

A Digital Divide Haunts Schools Adapting to Virus Hurdles

When April Schneider's children returned to in-person classrooms this year, she thought they were leaving behind the struggles from more... Read More

When April Schneider's children returned to in-person classrooms this year, she thought they were leaving behind the struggles from more than a year of remote learning. No more problems with borrowed tablets. No more days of missed lessons because her kids couldn't connect to their virtual... Read More

News From The Well
scroll top