U.S. Senator from Oregon Jeff Merkley joined Reps. Suzanne Bonamici (D-OR-01) and Pramila Jayapal (D-WA-07) to introduce the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act Act.
The SAFE Lending Act will protect consumers from deceptive and predatory practices that rob working families of wealth by cracking down on some of the worst abuses stemming from the payday loan industry, particularly in online payday loans, according to a Merkley press release.
Under the leadership of the Trump administration, the Consumer Financial Protection Bureau (CFPB) has backtracked on nationwide rules protecting consumers from payday loan predators. Without strong CFPB protections at the national level, state laws protecting consumers will be all the more important.
“Before we kicked payday lenders out of Oregon, I saw firsthand how payday lenders trapped families in my blue-collar neighborhood in an inevitable debt vortex,” Merkley said. “This legislation will provide important protections for consumers, protect state laws like Oregon’s, and create safeguards to prevent consumers from being trapped in an endless cycle of debt. American families work hard for their income, and they shouldn’t be left with their financial foundations ruined just because of a medical emergency or a surprise car repair.
“It is unacceptable that predatory lenders continue to trap consumers in a cycle of debt, taking advantage of families and individuals in times of financial difficulty,” said MEP Bonamici. “I am delighted to lead the SAFE Lending Act with Senator Merkley and Representative Jayapal to protect consumers across the country from these dangerous and unscrupulous practices and to provide necessary transparency.”
“Working families across the country do not deserve to have their hard-earned savings stripped away by payday lenders who continue to use predatory tactics to trap people in debt,” said MP Pramila Jayapal. “The SAFE Lending Act will provide important safeguards to ensure workers and their families are protected from payday lenders and end dangerous practices that entrap consumers.”
Many states enacted tough laws to end predatory lending, but payday predators continued to use online lending to prey on consumers by hiding behind layers of anonymously registered websites and “money generators”. prospects” to evade law enforcement.
Payday lenders with access to consumers’ bank accounts also issue money from loans on prepaid cards, linked to those accounts, which include high overdraft fees. When these cards are overdrawn, the payday lender can then access the consumer’s bank account and charge the overdraft fee, accumulating new debt. Even when the loan violates the law, predatory payday lenders can drain consumer bank accounts before individuals have a chance to enforce their rights.
The SAFE Lending Act of 2022 would enshrine in law three major principles to make the consumer lending market safer and more secure:
1. Make sure consumers have control of their own bank accounts
· Ensure that a third party cannot take control of a consumer’s account through remotely created checks (RCC) – checks from a consumer’s bank account created by third parties. To avoid unauthorized RCCs, consumers could pre-authorize exactly who can create an RCC on their behalf, for example when traveling.
· Allow consumers to cancel a direct debit on a small loan amount. This would prevent an Internet payday lender from stripping a checking account without a consumer being able to stop it.
2. Empower consumers to take back control of their money and increase transparency
· Require all lenders, including banks, to follow state rules for small payday loans they may offer to customers in a state. Many states currently have much stricter laws than the federal government. There is currently no federal cap on interest or any limit on the number of times a loan can be rolled over.
· Increase transparency and create a better understanding of the small loan industry by requiring payday lenders to register with the Consumer Financial Protection Bureau.
· Ban overdraft fees on prepaid cards issued by payday lenders who use them to access consumer funds and to add to the already exorbitant costs of payday loans.
· Require the CFPB to monitor all other charges associated with prepaid payday cards and enact a rule prohibiting any other abusive charges on prepaid cards.
3. Ban lead generators and anonymous payday loans
· Some websites describe themselves as payday lenders, but are actually “lead generators” that collect applications and auction them off to payday lenders and others. This practice is prone to abuse and has led to fraudulent debt collections.
· The SAFE Lending Act prohibits anonymously registered lead generators and websites in payday loans.
Joining Merkley in the Senate, the SAFE Lending Act is co-sponsored by Senators Edward J. Markey (D-MA), Tina Smith (D-MN), Cory Booker (D-NJ), Bernie Sanders (I-VT), Dick Durbin (D-IL), Tammy Duckworth (D-IL), Chris Van Hollen (D-MD), Dianne Feinstein (D-CA), Ron Wyden (D-OR), Richard Blumenthal (D-CT), Kirsten Gillibrand ( D-NY) and Martin Heinrich (D-NM).
Joining Bonamici and Jayapal in the House, the SAFE Lending Act is co-sponsored by Representatives Earl Blumenauer (D-OR-03), Jesús G. “Chuy” García (D-IL-04), Sylvia Garcia (D-TX-29 ), Sheila Jackson Lee (D-TX-18), Eleanor Holmes Norton (D-DC-At Large) and Katie Porter (D-CA-45).
The SAFE Lending Act of 2022 is endorsed by Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Federation of America, National Association of Consumer Advocates, National Consumer League, National Consumer Law Center, Public Citizen, and UnidosUS.