Markey joins the team of Merkley, Bonamici and Jayapal in enacting legislation to protect consumers from predatory payday credit practices

WASHINGTON (November 16, 2022) – Sen. Edward J. Markey (D-Mass.) today joined Sen. Jeff Merkley (D-Ore.) and Representatives Suzanne Bonamici (D-OR-01) and Pramila Jayapal (D-WA – 07) when introducing the Stopping Abuse and Fraud in the Electronic (SAFE) Lending Act. That SAFE Lending Act will protect consumers from deceptive and predatory practices that deprive working families of wealth by cracking down on some of the worst abuses to come out of the payday lending industry, especially online payday lending.

Led by the Trump administration, the Consumer Financial Protection Bureau (CFPB) has changed course on national regulations protecting consumers from payday loan robbers. Without strong CFPB protections at the national level, state consumer protection laws become all the more important.

Many states have enacted tough laws to stop abusive lending, but payday thieves continue to use online lending to prey on consumers, hiding behind layers of anonymously registered websites and “lead generators” to evade enforcement. Payday lenders with access to consumers’ bank accounts also issue the money from credits on prepaid cards linked to those accounts, which carry high overdraft fees. If these cards are overdrawn, the payday lender can then access the consumer’s bank account and collect the overdraft fee, thereby piling on more debt. Even when lending is against the law, abusive payday lenders can drain consumers’ bank accounts before individuals have a chance to assert their rights.

That SAFE Lending Act of 2022 would enact three main principles to make the consumer credit market safer and more secure:

1. Ensure consumers are in control of their own bank accounts

  • Ensure that a third party cannot gain control of a consumer’s account through remotely generated checks (RCCs) — checks from a consumer’s bank account that have been drawn by a third party. To prevent unauthorized RCCs, consumers could pre-authorize exactly who can create an RCC on his or her behalf, for example when travelling.
  • Allow consumers to cancel an automatic payout related to a small loan. This would prevent an internet payday lender from stripping a checking account without a consumer being able to prevent it.

2. Enable consumers to take back control of their money and increase transparency

  • All lenders, including banks, are required to comply with state regulations for small, payday-like loans they can offer customers in a state. Many individual states currently have much stricter laws than the federal government. There is currently no federal cap on interest rates or a limit on the number of times a loan can be renewed.
  • Increase transparency and 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 add to the already exorbitant cost of payday loans.
  • Call on the CFPB to monitor all other charges related to payday prepaid cards and enact a rule banning all other robbery charges on prepaid cards.

3. Ban on lead generators and anonymous lending

  • Some sites call themselves payday lenders but are actually “lead generators” who collect applications and auction them off to payday lenders and others. This practice is fraught with abuse and has led to fraudulent debt collection schemes.
  • The SAFE Lending Act bans lead generators and anonymously registered sites on payday loans.

Joining Markey and Merkley in the Senate, the SAFE Lending Act will be joined by Senators 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).

Along with Bonamici and Jayapal in the house, the SAFE Lending Act will be represented by 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).

That 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.

The final invoice text can be found here.

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