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 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 predatory 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. It is a commonsense measure designed to protect people from being trapped for months and sometimes years in triple-digit payday and car title loans. Congress should leave it alone.
The rule was finalized only after 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 these protections from predatory payday and car title lending. The North Carolina Coalition for Responsible Lending was active in that fight, supporting a strong rule from the Consumer Bureau that would not undermine strong state consumer protections, like North Carolina’s 30 percent interest rate cap for consumer loans.
Our coalition came together years ago, to help chase the predatory lenders out of the state when the dysfunctional business model of payday lending and the harms to North Carolinians became clear.
The business model of payday lending relies on repeat borrowing of unaffordable loans; 75 percent of 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. But 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 across the country, keeping money in the pockets of hard working families and seniors. And it is supported by more than 70 percent of Republicans, Independents and Democrats.
Some of us who represent the faith community in this coalition have said that 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.
And advocates for military families and veterans are familiar with this fight from when the Department of Defense recognized the dangers caused by payday and other high-cost loans and their impact on military readiness. In 2006, Congress passed a 36 percent interest rate cap to protect active-duty military and their families. This payday rule is a good first step in going beyond that to protect all Americans, including the more than 21 million veterans who do not receive Military Lending Act safeguards.
Members of Congress should know that there is no middle ground on this issue. If they support the CRA that overturns the Consumer Bureau’s payday-lending rule, they are standing with predatory lenders and against the people, plain and simple. They are standing with legal loan sharks who trap people in loans with 300 percent or 400 percent interest rates, people who struggle to pay their living expenses, veterans, and people living on fixed incomes such as social security recipients. If they support this legislation, they are standing with unscrupulous lenders that promise people a lifeline, only to lead them into long-term financial devastation.
We call on our North Carolina representatives in Congress to do the right thing. Stand up for us, stand against predatory lenders, and oppose this legislation that would repeal the national payday lending rule.
Jennifer Copeland is the executive director of the N.C. Council of Churches. Larry Hall is the secretary of the N.C. Department of Military and Veterans Affairs.