Payday loans. other ruinous lending practices get help from government
| Guest columnists
Federal regulators seem to be doing their best to allow predatory lenders to swarm our state and proliferate.
Last month, the Consumer Financial Protection Bureau rescinded an essential payday lending reform. And on July 20, a bank regulator proposed a rule that would allow predatory lenders to operate even in violation of a state interest rate cap – by paying out-of-state banks to pose as the “true lender” for the loans the predatory lender markets, makes and manages. We call this scheme “rent-a-bank.”
Especially during these times, when families are fighting for their economic survival, Florida citizens must again join the fight to stop 300% interest debt traps.
Payday lenders trap people in high-cost loans with terms that create a cycle of debt. While they claim to provide relief, the loans cause immense harm with consequences lasting for years. Yet federal regulators are blessing this nefarious practice.
In 2018, Florida payday loans already carried average annual interest rates of 300%, but Tampa-based Amscot joined with national predatory lender Advance America to propose a law allowing them to double the amount of the loans and extend them for longer terms. This expansion was opposed by many faith groups who are concerned about the evil of usury, civil rights groups who understood the impact on communities of color, housing advocates who knew the damage to dreams of home ownership, veterans’ groups, credit unions, legal service providers and consumer advocates.
Yet Amscot’s lobbyists rammed it through the Florida Legislature, claiming immediate necessity for the law because a coming CFPB rule would put Amscot and Advance America out of business.
What was this burdensome regulation that would shutter these “essential businesses”? A commonsense requirement, already met by responsible lenders, that they ascertain the ability of borrowers to afford the loans. In other words, can the customer meet the loan terms and still keep up with other bills?
What lender, other than the payday lender, does not ask this question?
Without the ability-to-repay requirement, payday lenders can continue to make loans with triple-digit interest rates, securing their repayment by gaining access to the borrower’s bank account and withdrawing full payment plus fees – whether the customer has the funds or not. This often ends in closed bank accounts and even bankruptcy.
And the proposed federal banking rule would not only challenge future reforms; it would allow all non-bank lenders engaging in the rent-a-bank scheme to ignore Florida’s caps on installment loans as well. Florida caps $500 loans with six-month terms at 48% APR, and $2,000 loans with two-year terms at 31% APR. The rent-a-bank scheme would allow lenders to blow right through those caps.
In this harsh economic climate, dismantling consumer protections against predatory payday lending is especially egregious. Payday loans, now more than ever, are exploitative and dangerous. Don’t let Amscot and Advance America and others who make their living this way pretend otherwise. Rather than strike long-fought consumer protections, we should be providing a strong, heavy-duty safety net. Rather than protecting predatory practices, we should be cracking down on exploitative financial practices.
Floridians should submit a comment to the U.S. Treasury Department’s Office of the Comptroller of the Currency by Thursday, asking them to revise this rule. And we need more reform: Support H.R. 5050, the Veterans and Consumer Fair Credit Act, a federal 36% rate cap that expands existing protections for active-duty military and protects all of our citizens – essential workers, first responders, teachers, nurses, grocery store workers, Uber drivers, construction workers, counselors, ministers and many others.
We must not let predatory lenders exploit our hard-hit communities. It’s a matter of morality; it’s a matter of a fair economy.
The Rev. James T. Golden of Bradenton is chair of the Social Action Committee for the African Methodist Episcopal Church, 11th Episcopal District. Alice Vickers is a former executive director of the Florida Alliance for Consumer Protection.