Last month, AFR and many of its member groups were among the nearly 250 signers of a letter urging federal bank regulators to “move quickly to ensure that payday lending by banks does not become more widespread” and to tell banks already making payday loans to “stop offering this inherently dangerous product.”
On Tuesday April 9th, petitions bearing the same emphatic message – and the signatures of more than 157,000 Americans (gathered by CREDO and Color of Change along with AFR, NPA, and CRL) – were hand-delivered to the Federal Reserve, the Consumer Financial Protection Bureau, the Office of Comptroller of the Currency, and the Federal Deposit Insurance Corporation. Meanwhile, Illinois Senator Richard Durbin reinforced the pressure against payday lending with the introduction of his Protecting Consumers from Unreasonable Credit Rates Act.
While a growing number of states have moved to outlaw payday lending over the past decade, the problem has become harder to combat, with major banks – Wells Fargo. U.S. Bank, and others – beginning to offer their own payday-style triple-digit-interest loans dressed up with polite names like “Direct Deposit Advance.” At the same time, the Internet has empowered a new generation of payday lenders to target just about anybody from anywhere. (Some of these online hustlers have incorporated offshore or on tribal lands, as well as in states without usury caps.)
Bank payday loans pose a special threat because, as Liz Ryan Murray of National People’s Action pointed out this week on The Hill’s Congress Blog, people who would be sensible enough to “avoid sketchy storefronts with ‘get cash now’ signs” often “don’t realize their personal bank’s short-term loans could be so toxic.” Taking advantage of that bond of trust, bank payday loan products “are decimating the bank accounts of some of America’s most vulnerable residents,” Murray writes, noting that “a full 25 percent of bank payday loans are to recipients of Social Security.”
Senator Durbin’s measure would end payday lending regardless of its auspices, by establishing a nationwide interest-rate cap of 36 percent for all forms of consumer credit. Another bill – the SAFE Lending Act, introduced by Senator Jeff Merkley (D-Ore.) – zeroes in on the online and offshore predators.
But because these proposals face daunting odds in Congress, the problem remains, for now, in the hands of the prudential bank regulators – the Fed, the OCC, the FDIC, and the CFPB. Fortunately, they have the authority to call an immediate end to payday lending by the banks they supervise. It is time for them to use that authority, once and for all.
For more information, see these two recent reports from our allies, along with letters of support for the anti-payday-lending bills.
- Payday Lending: How a Short-Term Loan Becomes Long-Term Debt (Center for Responsible Lending)
- Why Cap Small Loans at 36% (National Consumer Law Center)
- Letter on S 3452 (Original Durbin Bill)
- Letter on SAFE Lending Act (version introduced in the last Congress)