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Congress urges stronger action against ‘payday’ loan vendors


The Federal Trade Commission (FTC) will provide $32 million in relief to consumers who were caught in a maze of charges and fees designed to trap them in payday loans they never authorized. The enforcement action announced July 7, affects two lenders based in Kansas City, Mo. who operated as many as 16 different businesses involved in online lending. The FTC also imposed an additional $22 million fine against the lenders and banned them from all consumer lending.

Members of Congress are urging the FTC to take similar action against similar violators.

Every day online and storefront payday lenders trap borrowers in long-term cycles of debt. Their triple-digit interest rates and access to borrowers’ bank accounts or car-titles place these borrowers in financial jeopardy. FTC’s actions and others undertaken by federal and state regulators reveal rampant abuses in the short-term, small-dollar lending market.

More than 100 Members of Congress representing 35 states, the District of Columbia and the Virgin Islands, recently urged the Consumer Financial Protection Bureau (CFPB) to enact a strong rule to curb abusive practices by payday lenders and other high-cost predatory loans like car-title and certain installment loans.

In separate letters, 33 U.S. Senators and 68 House Members urged the same action: strong regulation and enforcement of abusive and predatory consumer lending.

Their calls for CFPB rulemaking comes as the Bureau finalizes its proposed rule, first announced in late March. At that time, a letter signed by 500 consumer advocates from all 50 states waged an unprecedented push for reining in abusive small-dollar and high-cost loans engaged the White House and Capitol Hill.

Now, after listening to an onslaught of diverse and strong voices, federal lawmakers are adding their voices and influence to the continuing fight for fairness.

“Predatory lenders should not be able to continue unfair, deceptive, and abusive acts or practices that are designed to trap borrowers in a cycle of debt,” wrote 33 Senators. “This is a business model rooted in preying on individuals and families that have no ability to repay, and the CFPB has a critical opportunity to protect consumers by issuing strong rules.” Members of Congress with constituencies as varied as their broad geographic expanses similarly called for CFPB to adopt strong regulation.

“While there is a need for affordable credit, unfair, deceptive and abusive payday and car title lending practices often pull consumers into a cycle of debt,” wrote the members. “We support the Bureau’s efforts to close the door to unaffordable loans by addressing failure to underwrite for affordable payments, repeatedly rolling over or refinancing loans, accessing the consumer’s account for repayment, and performing costly withdrawals.”

As consumer advocates stress the importance of the ability to repay a loan as a cornerstone of both responsible lending and effective regulation, a new poll jointly commissioned by Americans for Financial Reform and the Center for Responsible Lending, asked 2016 likely voters their opinions on consumer lending and regulation, Wall Street influences and actions taken by the Consumer Financial Protection Bureau (CFPB).

Respondents showed strong and bipartisan support for regulation of financial services and products. By more than a 10-to-one margin, they favored a rule requiring small-dollar lenders to verify a customer’s ability to repay before a loan can be issued.

Other poll results showed:

• Nearly three-quarters – 73 percent – said they favor the central provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act;

• Respondents continue to view the financial industry as under-regulated; and

• They also believed that regulations and enforcement will ensure financial institutions act fairly and responsibly.

“We are thankful for lawmakers and regulators standing up against these predatory loan practices which drain billions of dollars a year from low-income families,” said Diane Standaert, director of state policy with the Center for Responsible Lending. “As CFPB moves towards issuing its proposed rules, we urge it to use its full authority to stop the dangerous debt trap of these loans, and eliminating loopholes.”

According to policy experts, CFPB could act on the pending regulation sometime this fall.

Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at

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