With Maine borrowers now ripe for payday lender abuse, lawmakers must take action
Last week, the Consumer Financial Protection Bureau (CFPB) released new regulations on payday lenders. Instead of reigning over the notoriously greedy industry, the office eliminated common sense requirements that would protect consumers.
In doing so, the office has turned its back on the very consumers it is supposed to protect, leaving Maine families exposed to financial predators at the height of a global pandemic and economic crisis. State and federal lawmakers must step up and protect consumers from well-documented credit abuse by the payday lending industry.
Payday lenders have designed their loan products to trap borrowers in unsustainable debt. They charge outrageous interest rates of up to 400% of the APR, knowingly make withdrawals from borrowers’ depleted checking accounts so they can assess large overdraft fees and provide cash loans whether or not the recipient can. afford to repay the loan. Banks, credit unions, or even credit card companies don’t have their hands free.
Because they make the most profit when borrowers cannot repay their loans, payday lenders aggressively market their loans to families most vulnerable to predation, even in a strong economy.
Now, in an economic crisis that has seen one in six jobs disappear, unprecedented levels of unemployment and tens of thousands of people losing their health insurance, Mainers are even more sensitive to the astute advertising of payday lenders.
Many of Maine’s most vulnerable people are frontline workers – health workers, grocery store clerks, and day care and nursing home attendants who are disproportionately women and Mainers of color. These Mainers earn the least and often lack sickness and health benefits, but are the most likely to be exposed to the coronavirus even though they drive our economy forward.
Payday lenders have long exploited loopholes and created new ones. They aggressively pushed the legislation as part of a coordinated national program to relax state laws that restrict their predatory habits. Now, at the worst possible time, the new CFPB rule signals that consumer protections are unnecessary and gives the green light to industry lobbyists to challenge state consumer laws.
The CFBP has ignored the evidence and fabricated data to justify the repeal of its most significant protections.
The Mainers need more protection from Federal Watchdogs, not less. Maine lawmakers must be prepared to stand up for consumer rights. State action can provide a level of protection that the federal government has rejected.
At the same time, Congress cannot escape its responsibility to bring the rogue CFPB under control. Federal lawmakers must impose tougher consumer protection laws and demand that the CFPB fulfill its mission to protect consumers, not the industry that attacks them.
This post originally appeared on mecep.org and is republished here with permission from the Maine Center for Economic Policy.
Photo: Mainers protest a payday loan company in Portland. | Beacon staff