Supporters of loan sharking swarm in the House
WASHINGTON — Faced with the opportunity to protect Americans from payday lenders and their 400 percent interest rate loans, a majority in the U.S. House of Representatives instead chose to side with America’s legalized loan sharks and give them special protections for their dangerous products.
“Payday lenders depend on keeping people trapped in loans charging 400 percent interest. Congress just voted to give payday lenders a free pass, showing how out of touch they are with their constituents,” Center for Responsible Lending executive vice president Diane Standaert said. “This vote came despite the fact that 73 percent of likely voters support protections against the harm of the payday debt trap. While these Congress members are failing their constituents, the Consumer Financial Protection Bureau is working to stop the harmful debt trap of payday loans.”
“Once again, predatory lenders and their allies in Congress are working to ensure that ever more American families fall into the payday loan debt trap,” Said Gynnie Robnett, campaign director at Americans for Financial Reform. “Those who voted for stripping CFPB of enforcement authority are giving payday lenders keys to circumvent state laws and other protections put in place by the public directly. This is a clear warning signal: Predatory lenders will never stop trying to rip off American families. Congress should resist the moneyed lobbyists, and stand with ordinary Americans.”
“The decision to side with a sleazy industry that makes its millions trapping desperate people in triple-digit-interest-rate loans boggles the mind,” said Lauren Saunders, associate director of the National Consumer Law Center. “Payday lenders drain billions of dollars in fees every year from the communities that need it most – communities many of these members of Congress are supposed to be here to represent.”
“This was a vote to take the lifeguard off the beach and let loose an industry that harms millions of families,” said Jessica Juarez Scruggs of People’s Action. “Anyone watching the House in action today would have seen a master class in how Congress really works – for those with the money to buy what they want.”
The vote giving special protections to payday lenders came today during the debate over the Financial Services and General Government bill, which funds some basic functions of the federal government, including the Treasury Department.
Payday lenders’ supporters in Congress sneaking language into that bill entirely eliminates the authority of the Consumer Financial Protection Bureau (CFPB) to prevent abuses in payday and car title lending, either by writing new rules or enforcing existing law. If this provision is adopted, payday loans will have fewer federal protections than any other consumer finance product, despite the extraordinary harm of the payday debt trap.
The typical interest rate of a payday loan is 391 percent APR, and payday lenders make 75 percent of their profits off of consumers with more than 10 loans each. Because payday lenders collect directly from a borrower’s bank account, payday lenders can remain profitable even when borrowers cannot afford to repay them without defaulting on other financial obligations.
Nationally, payday lenders drain $8 billion in fees from the U.S. economy every year.
Rep. Keith Ellison (D-Minn.) introduced an amendment to take this language out of the appropriations bill and continue to allow the CFPB to regulate payday lenders as it regulates all financial services businesses. The amendment failed with four Republicans joining Ellison to protect borrowers and three Democrats choosing to side with payday predators.