Last week, the Consumer Financial Protection Bureau (CFPB) released new regulations on payday lenders. Instead of reigning in the notoriously greedy industry, the Bureau eliminated common sense requirements that would protect consumers.
In doing so, the Bureau has turned its back on the very consumers it is meant to protect, leaving Maine families exposed to financial predators at the height of a global pandemic and economic crisis. State and federal lawmakers need to step up and protect consumers from well-documented loan abuses by the payday loan industry.
Payday lenders have designed their loan products to trap borrowers in unsustainable debt. They charge outrageous interest rates as high as 400 percent APR, knowingly make withdrawals from borrowers’ depleted checking accounts so they can assess heavy overdraft fees and give cash loans whether or not the recipient can afford to repay the loan. Not banks, credit unions, or even credit card companies get this free hand.
Because they make the most profit when borrowers can’t repay their loan, payday lenders aggressively market their loans to families who are most vulnerable to predation, even in a strong economy.
Now, in an economic crisis that’s seen 1 in 6 jobs disappear, unprecedented levels of unemployment and tens of thousands losing their health insurance, Mainers are even more susceptible to payday lenders’ slick advertising.
Many of Maine’s most vulnerable are frontline workers — health care staff, grocery clerks and child care and nursing home attendants who are disproportionately women and Mainers of color. These Mainers earn the least and often lack sick pay and health care but are most likely to be exposed to the coronavirus even as they keep our economy moving.
Payday lenders have a long history of exploiting loopholes and creating new ones. They have aggressively pushed legislation as part of a coordinated national agenda to loosen state laws that restrict their predatory habits. Now, at the worst possible moment, CFPB’s new rule signals that consumer protections are unnecessary and gives the green light to industry lobbyists to contest state consumer laws.
Mainers need more protection from federal watchdogs, not less. Maine lawmakers need to be prepared to stand up for consumer rights. State action can ensure a level of protection that the federal government has rejected.
At the same time, Congress cannot escape its responsibility to rein in the rogue CFPB. Federal lawmakers must impose stronger consumer protection laws and to demand that the CFPB carry out its mission to protect consumers, not the industry that preys on them.