Twenty-eight Democratic US Senators have joined the call supporting the federal payday lending regulation proposed by the Consumer Financial Protection Bureau -- and urging that they be made even stronger.
/By Chad M. Leo<>PM BlogSpace Report/ Throughout the country millions of minority workers and their families are being financially disenfranchised, and are being forced to give banks over half of what they would ever bring home from a paycheck.
Payday lenders look like mom-and-pop storefront operations but many are national franchises and are enabled by supposedly well-regulated chartered banks that support and profit from payday lending.
Payday loans typically carry rates of 300 percent annual interest. Thankfully, 14 states plus the District of Columbia enforce laws that prevent these high-cost abusive loans that ensnare people in unaffordable debt traps. Over 90 million people live in states that are payday loan free; Maryland’s regulations are not perfect but keep most abuses to a minimum.
However, there is still work to be done. The Consumer Financial Protection Bureau is proposing rules to regulate these loans on a federal level. Although they cannot introduce a cap, the Bureau could ensure that the loans are affordable in light of the borrower's income and expenses by requiring lenders to demonstrate this.
Members of the US Senate just this week released a letter in support of the CFPB rules and urged that they be strengthened even more – a call that has been echoed by Progressive Maryland and other pro-worker, pro-consumer organizations. (You can comment to the CFPB yourself through this link).
A July 20 release from Sen. Sherrod Brown (D-Ohio) stated “Today, 28 U.S. Senators—led by Senators Sherrod Brown, Jeff Merkley (D-Ore.), Dick Durbin (D-Ill), and Chris Coons (D-Del)—wrote to the Consumer Financial Protection Bureau (CFPB) expressing support for the agency’s small-dollar lending rule and encouraging the consumer agency to strengthen consumer protections in the proposed rule before finalizing it.
“[W]e encourage the CFPB to strengthen certain protections in the proposed rule to ensure the strongest possible defense against the predatory lending models that trap consumers in unaffordable and escalating cycles of debt,” the Senators wrote. “Research shows that small-dollar loans with excessive interest rates often drag consumers into a cycle of debt that is not sustainable… For most Americans, these high-cost loans are unaffordable with one in five borrowers eventually defaulting.”
Maryland Sens. Barbara Mikulski and Ben Cardin were among the 28 who signed the letter; the list also included Sen. Bernie Sanders of Vermont, until recently a Democratic presidential candidate.
It is incomprehensible that banks are allowed to trap hard-working people into these vicious cycles of debt, but yet it persists. These regulations would ensure that banks aren’t tricking American citizens into biting off more than they can chew, and should definitely get the ball rolling to stricter regulations across the country.
Over 100,000 people across the United States are in support of these regulations, and a healthier and more fair American economy. Progressive Maryland continues to support strengthening these regulations as they are finalized, to end predatory lending for good.
Chad M. Leo is an intern at Progressive Maryland