New U.S. Senate Bill Takes Aim at Online Payday Lending
On July 24, 2012, three U.S. senators introduced a bill in the U.S. Senate that would crack down on the worst practices of the online payday lending industry. In a press release, it was announced that Oregon Senator Jeff Merkley, New Mexico Senator Tom Udall and Illinois Senator Dick Durbin had introduced the “Stopping Abuse and Fraud in Electronic (SAFE) Lending Act.” Besides cracking down on the worst practices of online payday lending, the release noted, it would give states more power to enforce already-existing rules to protect consumers from predatory loans.
(First Nations Development Institute has maintained a long-term focus on combating predatory lending. We believe that for Native Americans, the impact of predatory lending is devastating because it destroys the potential for asset building that is needed to bring economic security to Indian families and communities. To find out more about First Nations’ efforts to combat predatory lending, please go to this link: http://www.firstnations.org/program-combatingpredatorylending.)
The SAFE Lending Act has been endorsed by more than 40 organizations, including the Native American CDFI coalition, Americans for Financial Reform, Center for Digital Democracy, Center for Responsible Lending, Consumer Federation of America, Consumers Union, the National Consumer Law Center, the NAACP and others.
“It is unacceptable that financial predators are using the ‘Wild West’ of the Internet to strip wealth from working families,” said Merkley in the news announcement. “This abusive, predatory lending hits families hard, hurting the parents and the children. We must close the loopholes that have allowed companies to utilize practices already banned in many states.”
“Too often, families who turn to payday lending fall victim to deceitful practices that make it harder for them to make ends meet. With payday lending moving online, the opportunities for abuse are growing,” said Udall. “We owe it to those who earn an honest paycheck to ensure they are protected online just as they are in many of our states, like New Mexico.”
“Even as our economy begins to show signs of recovery, many hardworking families are still struggling to make ends meet,” said Durbin. “Unfortunately, many of these families are the targets of lenders offering payday loans with outrageous, often hidden interest rates that can have crippling effects on those who can afford it least. This bill will protect consumers and law-abiding lenders and I hope we can move it quickly on the floor.”
The press release stated that many short-term payday loans involve exploding interest rates, eventually accruing interest of 500 percent or higher. It said more than 20 states have passed legislation to stop abusive lending, but these efforts have been subverted by the growing online presence of payday lenders.