Tag Archives: payday lending

Trump Team Greenlights Predatory Payday Lending

New Orleans      We can count the days until we pray that’s it is over, but until then the drumbeat of woe is bound to continue.  The gutted Consumer Financial Protection Bureau proved that it really might need a name change as it announced the shelving of Obama-era reforms to payday lending which will exploit lower income consumers rather than protect them.

The Obama rule wasn’t perfect, but it was progress.  Nothing had been done about the usurious interest rates for example, but it had taken positive steps.

There were limits proposed on the number of loans borrowers could take sequentially.  Such limits are critical in blocking the predatory nature of payday lending.  They require loans to be on a common database so that desperate low-income borrowers are not robbing Peter to pay Paul for example.  A study ACORN commissioned by academics in Canada where regulating payday lending has been a major campaign of ours for the last seventeen years found that borrowers were caught in a debt trap cycle for eighteen months or more to resolve the first loan as interests, fees, and penalties pyramided throughout the period.

The second key advance of the Obama rules required an affordability test before the loans were made.  Whether payday lending, subprime lending, basic mortgages or whatever the product, the baseline for any loan to be fair to the consumer has to include an assessment of affordability.

The Trump team eviscerated both of these reforms to greenlight the industry in its continued efforts to exploit low-and-moderate income families.  All this despite CFPB whistleblowers that had documented a stacked house research effort that had been fabricated to a predetermined aim of gutting the Obama regulations.

The industry reportedly collects $30 billion in fees from this predation, making it easy for them to drop $12 million in campaign contributions to Republican lawmakers to grease the wheels.  The Community Financial Services Association of America, their trade association, is doing the happy dance because its rip-offs of lower income borrowers will be able to continue unabated.

Their only claim is that they supply last ditch credit at exorbitant prices to desperate families.  Everyone not on the take from the industry, knows that there are many better ways to provide credit that don’t trap families in permanent poverty.

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Why Can’t We Fix Payday Lending?

Pearl River     We’ve been fighting payday lending for over fifteen years in Canada with some success as well a truckload of frustration.  The issue has been in our sights for several decades in the United States as well.  In Canada, ACORN has been stymied as the federal government pushed the issue into a province by province regulatory regime. The same was true for the United States until the breakthrough creation of the Consumer Finance Protection Bureau.  The CFPB undertook an extensive rule-making procedure during the Obama administration.  The rule that emerged was not perfect, but the fact that it limited the access to these predatory products to consumer affordability and ability to pay was a breakthrough.

The industry, like so many, has roared back under the Trump administration.  A bullseye has been on the back of the CFPB officially since the inauguration, but rhetorically since its inception by the conservative, pro-business right.  Their mission has not been reform but total destruction.  The director was pushed out and toadies promoted to do their bidding, after a brief run where it was a part-time job for an agency axe murderer.

Recently a veil has been lifted on the dirty work by way of a departing memo written from one of the CFPB economists who was on his way out the door to the Federal Reserve which has now become public.  He eviscerated the process and made clear that politics was cherry picking the many years of research that had led to the creation of the previous rule.  The most shocking revelation was the fact that to justify their new numbers on the economic impacts of a new rule, partisan appointees had decided to pretend the new rule had not gone into effect so they could discount the benefits it would have produced and ignore the previous process altogether.

Needless to say, lawyers are undoubtedly lining up to wipe the lipstick off of whatever pig they produce in this corrupt process.  I can’t believe we’re still having this fight!  Especially now when, in the midst of a terrible depression, low-and-moderate income people, already locked out of the mainstream financial system, are going to herded into the predatory system in droves.

Along with ACORN Canada leaders and staff, I was mostly a silent participant in a recent call with a VP of RBC, the Royal Bank of Canada, on a number of subjects, but mostly the lack of products offered by this major bank to low-and-moderate income customers.  The rationale for a $45CN charge on bounced checks was particularly specious with a pretense that in this computer age it reflected the cost of handling.  Worse for our members who have been fighting for years in the Internet for All campaign, RBC argued that they had an email alert system for possible overdrafts even though texting would have been more effective.  The leaders virtually begged this very cordial and accommodating retail banking executive to push RBC into competing with predatory payday lenders with products that would serve the LMI community.  She promised a follow-up call with others, but the lack of a real response for these issues, engaged for so many years at every level, was very disappointing.

The answer to the vexing question, “Why can’t we fix payday lending?” seems simple and tragic.  Banks and governments simply don’t care about the financial ruin they bring to low-and-moderate income families and communities.  There is money in it for them, despite the penury and hardship it brings to everyone else, and that’s answer enough for them and their political servants.

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