Will Congress grant free rein to predatory payday lenders?


February 13, 2018

UPDATE: H.R. 3299, the bill referenced below, passed the House by a vote of 245-171 on Feb. 14. See how your representative voted here.

Last month, Voices for Human Needs reported on efforts by the Trump administration to repeal an Obama-era rule aimed at curtailing the predatory practice of payday lending.

Not to be outdone, the U.S. House is preparing to vote on a bill that would take away states’ rights to cap interest rates on payday loans.  This would give a green light to payday lenders to charge huge interest rates to low-income consumers without having to abide by state laws.

The bill, H.R. 3299, is misleadingly called the “Protecting Consumers’ Access to Credit Act of 2017.”  It has both Democrat and Republican cosponsors in both the House and in the Senate version.  The bill is supported by out-of-state banks, online lenders, debt collectors, payday lenders and others who want to be able to legally disregard state-level interest rates.  Consumer advocates warn that state interest rate limits are the most effective protections against the harms of predatory lending.

If lenders are allowed to ignore state interest rate caps, they could make loans of 300 percent annual interest or higher, regardless of what state law allows.  Advocates warn that unaffordable payday loans and other triple-digit interest predatory loans have devastating consequences for already financially distressed borrowers – trapping them in a cycle of debt and increasing the likelihood of delinquency on other bills, delayed medical care, bankruptcy, and even eviction.

Currently, 42 states plus Washington, D.C. have state interest rate caps that limit high-cost loans and lines of credit.  Not only would the proposed legislation override these limits; it would also take away the right of state voters or legislatures to enact interest rate caps in the future.

Fortunately, more than 200 organizations, including consumer advocate, civil rights and faith organizations across the country, have come out against the legislation.  And 20 State Attorneys General have signed on to a letter warning that provisions in the bill “would restrict states’ abilities to enforce interest rate caps. It is essential to preserve the ability of individual states to enforce their existing usury caps and oppose any measures to enact a federal law that would preempt state usury caps.”

So what can you do?  Americans for Financial Reform is circulating this action alert for advocates to send to their email lists.  And here is a sample email you can send to your member of Congress.  Finally, if you’d rather call, here is a sample telephone script.

A vote on the legislation is expected this week, so take action now!

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