“‘Payday lenders are clearly watching this with bated breath,’ said José Alcoff, manager of the Stop the Debt Trap campaign at Americans for Financial Reform. ‘I think this is clearly a case where the system is getting more and more rigged, where they have, as they say, the fox in charge of the henhouse.’”
““When Mick Mulvaney was a member of Congress, the World Acceptance Corporation gave more campaign contributions to him than any other member of the U.S. House of Representatives. Today, as acting director of the Consumer Bureau, Mulvaney showed his gratitude by dismissing a four-year investigation into deceptive practices the company has used to trap consumers into debt. Mulvaney’s actions leave no doubt where his priorities lie – campaign friends over consumers.”
“This abrupt and reckless decision by Mick Mulvaney shows the level of disdain he has toward working families. He’s giving a free pass to his past campaign contributors, and he is enabling payday lenders to get away with charging obscene triple digit interest rates in violation of state law, to people who are already struggling to make ends meet.”
“This move shows the level of influence that payday lenders have over Mick Mulvaney, who for years received campaign contributions while a member of Congress. With today’s announcement, Mulvaney is sending an unmistakable signal that he wants to kill this common-sense regulation.” Payday loans “trap borrowers in an unaffordable cycle of debt, causing severe financial harm such as bank penalty fees, delinquency on other bills, or even bankruptcy. There is no reason to reopen the rule, and doing so shows disdain for consumer protection and low-income communities that are targeted by these debt trap loans.”
“[I]t is a telling sign of just how dysfunctional the American economy has become that some of the nation’s biggest private equity firms are now heavily invested in the payday loan business and its slightly more respectable cousin, subprime installment lending. A new report from Americans for Financial Reform and the Private Equity Stakeholder Project details dozens of such arrangements involving some of the biggest names on Wall Street and the scuzziest operations on Main Street.”
Private equity moguls have invested heavily in the payday and installment lending. The development puts private equity firms in the position to profit from efforts by payday lenders to roll back an important new rule by the Consumer Financial Protection Bureau.
“The package includes legislation that would release the nation’s largest banks from measures to prevent a financial crisis, saving them billions of dollars in expenses,” AFR’s Lisa Donner said. “It would also allow banks and fintech firms to cooperate in new forms of payday lending, and make investment products riskier for mom-and-pop savers. And it’s all happening against the backdrop of a big proposed tax cut for Wall Street.”
“Oversight of payday loans is particularly lax in Ohio… State voters approved reforms in 2008, but the industry found ways around the restrictions on interest rates and other measures designed to protect borrowers… ‘Payday and car title lenders profit from repeatedly dragging hard-pressed people deeper and deeper into debt, and taking advantage of families when they are financially vulnerable,’ Lisa Donner, with Americans for Financial Reform, told the Associated Press. ‘Curbing the ability to push loans that borrowers clearly cannot repay is a key protection.'”
“In 2013, the FDIC and OCC issued guidance aimed at curbing the harms of these debt trap loans. At the same time, the Federal Reserve issued a supervisory statement to the same end… But today, banks are attacking the FDIC and OCC protections that have prevented banks from trapping people in unaffordable payday loans.”
We write to ask for the bank’s pledge that it will not begin making payday loans, and that it will oppose the
rollback of the regulatory guidance, which would make it easier for other banks to do so.
“Consumer advocates say tougher rules are needed because lenders often prey on desperate borrowers who are living paycheck to paycheck by trapping them in debt. ‘Payday and car title lenders profit from repeatedly dragging hard-pressed people deeper and deeper into debt, and taking advantage of families when they are financially vulnerable,’ Lisa Donner, the Americans for Financial Reform’s executive director, said in a statement. ‘Curbing the ability to push loans that borrowers clearly cannot repay is a key protection.’”