Under the financial reform bill that the Senate is currently debating (the Restoring Financial Stability Act of 2010), payday lenders would be subject to new regulations promulgated by the proposed Consumer Financial Protection Bureau to ensure that their services are "fair, transparent, and competitive." Depending on how aggressive the Bureau ends up being, the rules could severely limit the terms under which payday lends could do business.
But while the underlying bill isn't good for the payday loan industry, an amendment being proposed to it from Sen. Kay Hagan [D, NC] could be more damaging. It would ban payday lenders from giving out new loans to customers who have already taken out six payday loans or have been under loan obligations for more than 90 days in the past year.Read Full Article
Last month, when bipartisan financial reform negotiations where breaking down in the Senate Banking Committee, Sen. Bob Corker [R, TN] stepped up from out of nowhere and volunteered to take over for Ranking Member Sen. Richard Shelby [R, AL] on representing the Republicans at the negotiating table. By all accounts, he has in fact managed to keep the bipartisan negotiations alive. He and Sen. Chris Dodd [D, CT] are reportedly ready to introduce their bill to the full Senate imminently.
The New York Times reported yesterday that one of the concessions Corker has won from Dodd is a special exemption in the proposed Consumer Financial Protection Agency's (CFPA) enforcement powers for payday lenders and other nonbank credit dealers. These are generally the most predatory of lenders, commonly charging interest rates as high as 400 percent. Corker's exemption would allow the CFPA to create rules to regulate the payday loan industry, but it would't give the agency any power to enforce the rules like it could for banks and mortgage dealers.
Talking Points Memo yesterday ran a profile W. Alan Jones, Bob Corker's payday loan shark/multi-millionaire friend and political supporter, and how he may have influenced Corker's decision to fight for the regulatory exemption for his industry:Read Full Article
Some of the most absurd lending and borrowing happens in the payday loan industry. According to the Center for Responsible Lending (.pdf), the average payday loan borrower pays $800 for each $325 they borrow. That's an absolutely absurd interest rate, but according to the New York Times, the senators who are designing financial reform legislation are going to include a special carve-out so the industry can keep on dealing in these abusive loans:Read Full Article
I've been writing a bit about Rep. Luis Gutiérrez's [D, IL-4] bill that would put what amounts to a generous 391 percent cap on payday loan interest rates and the pawn shop industry's campaign against it. Mike Lillis of the Washington Independent has the campaign finance perspective: Of the 21 individuals who donated more than $21,000 to the Illinois Democrat in the first quarter of this year, 15 represent the pawnshop industry, according to documents filed with the Federal Election Commi...Read Full Article
In light of our current debt-fueled economic crisis, Congress is looking at reforming one of the most predatory forms of lending -- payday loans. But according to a range of consumer, community and civil rights groups the leading bill in Congress to deal with the issue, the Payday Loan Reform Act of 2009, would actually protect the "predatory payday loan business model and will stall or stop the significant progress that has been made at the state level to curb usurious lending."Read Full Article