Last year, activists from around the country, including MPA partner National People’s Action, won a big victory against predatory lenders. After months of public pressure, federal regulators finally cracked down on the big banks, forcing them to stop offering predatory payday products with hefty interest rates of more than 300 percent.
Big bank payday loans are just the tip of the predatory lending iceberg, however. The crackdown didn’t extend to payday stores like “ACE Cash Express” or “Check Into Cash” and it didn’t apply to online payday loans or other storefronts that offer title, installment, or pawn shop loans.
A recent report found that more than 1/2 of all loans made by payday lenders end up rolling over 10 times; meaning most families that get a loan can’t pay it off and have to take out more loans to pay off the previous one, draining money from their pockets and local economies.
In Maine, there are some laws that protect against the very highest rates payday lenders charge in other states, but a quick trip to your computer shows that with the click of a button out of state lenders are ready to go around Maine’s laws. The truth is that in the age of the Internet, state laws are a decent start, but federal regulations are needed to adequately protect all communities from abusive payday lenders.
The good news is there’s an opportunity to stamp out the worst payday loan abuses.
Right now, the Consumer Finance Protection Bureau (CFPB) is writing rules for the consumer lending industry that could crack down on the worst abuses practiced by payday, title and installment lenders. But the payday lenders are not going down without a fight - their business model depends on trapping people in a cycle of high cost debt. The industry will be working to buy-off Congress and strip the CFPB’s authority to write good rules, buying ads to try and convince people that preying on the poor is good business.
Last year’s victory shows that when activists work together, real progress can be made in stopping predatory lending. That’s why it’s crucial to push now for a broad, strong, and effective rule and keep the pressure on the CFPB to protect Maine families from predatory lenders, keeping the spotlight on the destructive practices of the industry and making sure Maine’s members of Congress stand up for common sense financial regulation.