The facts about how payday lenders trap working families in debt are shocking:
- 19 million families use payday loans each year.
- One in four of those borrowers spends at least 83% of the year owing money to a payday lender.
- Four out of five payday loans are rolled over or renewed within 14 days.
- In Maine, one-fourth of those contacting the state credit bureau owe money to more than one payday lender.
A Consumer Financial Protection Bureau (CFPB) study also shows that the majority of all payday loans are to borrowers who renew their loans so many times they end up paying more just in fees than they originally borrowed.
Payday lenders make short-term, unsecured loans without verifying that the borrower can afford to repay them. They grab their loan repayments directly from a borrower’s bank account and, if the account has no funds, they assess egregious fees on top of triple-digit interest to roll the loan over to the next payday.
We have known for years that payday lenders exploit women, seniors, our military service men and women, and other low-income borrowers. But now, a new report tells us how payday lenders actually work to circumvent laws and rules designed to protect consumers from their abuses.
Representative Maxine Waters, Ranking Member on the U.S. House Financial Services Committee, recently released a report exposing how payday lenders evade state consumer laws. The report, “Skirting The Law: Five Tactics Payday Lenders Use To Evade State Consumer Protection Laws,” underscores the need for strong federal protections.
Payday lenders across the country are thumbing their noses at state regulators: disguising their operations, ignoring regulations, and exploiting loopholes. In Maine, according to the consumer credit protection bureau, lenders use online lending to broker payday loans to consumers without first obtaining a state business license or complying with other state business regulations. The bureau does not even know these lenders are doing business in Maine until they receive a consumer complaint, and then, the lender is often difficult to find hiding behind affiliated financial service providers or in the depths of cyberspace.
The CFPB has proposed new federal rules to crackdown on predatory lenders. They need to hear from the public that we support strong rules to rein in abusive payday lending practices. You can submit comments through MECEP’s web portal that will take you directly to CFPB. The public comment period closes on September 14, 2016.
Submit your comments here: http://stoppaydaypredators.org/MECEP/.