On Friday, March 23, Senator Lindsey Graham (R-SC) introduced a bill in the Senate that would nullify protections for payday loan borrowers by repealing the Consumer Financial Protection Bureau’s (CFPB) federal payday loan rule.
Late last year, a bipartisan group of lawmakers introduced a joint resolution under the Congressional Review Act in the House to override the rule. Since its introduction, Rep. Hollingsworth [IN-09], Rep. Banks [IN-03], and Rep. Messer [IN-06] have co-sponsored the bill.
The rule, which was finalized last year and is set to go into effect in August of 2019, already appears to be in jeopardy in the hands of CFPB Acting Director Mulvaney, who announced that the Bureau would reconsider the protections. Congress has until early May to overturn this rule.
The rule requires payday and car title lenders to either assess a borrower’s ability to repay before issuing a loan or issue a limited number of loans without assessing a borrower’s ability to repay. This is a common sense measure that is designed to protect people from being trapped in the high-cost loans that characterize the payday and car title industries.
“Polling data shows that 78% of Hoosiers support an ability to repay requirement,” said Erin Macey, Policy Analyst at Indiana Institute for Working Families. "Our Senators are going to have to decide whether they stand with payday lenders or Hoosiers.”
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 Bureau to implement strong protections from predatory payday and car title lending. The business model relies on repeat borrowing of unaffordable loans—75% of all payday loan fees are generated from borrowers stuck in more than 10 loans a year.
“In a recent poll, 75% of Hoosiers opposed a payday loan store opening in their community. That’s because they know the destabilizing impacts of this business model on consumers and neighborhoods,” said Kathleen Lara, Policy Director for Prosperity Indiana. “We hope Senators listen to their constituents’ concerns, instead of undermining sound policy updates.”
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. The practice costs Indiana families an estimated $70 million per year in fees for loans with interest rates that average 391% annual interest.
Earlier this year, at the request of advocates, Indiana’s General Assembly rejected a measure to expand payday lending in Indiana.
There are a number of ways you can support common sense payday lending reform, including:
