Consumer, Urban Coalitions Pushing Regulators Again on Payday Loans
Two coalitions, one a broad-based consumer affairs group of other organizations and the other a group of cities, has written federal regulators once again calling on them to do something to reign in the participation of federally insured banks in payday lending.
In letters to chairmen of the Federal Reserve and the FDIC, as well as to Thomas Curry, Comptroller of the Currency, and Consumer Financial Protection Bureau Director Richard Cordray, the two coalitions expressed gratitude for pledges of action regulators have already made but said that those pledged actions now need to be made.
“Over the last year, the need for federal regulatory action has only become clearer,” wrote the unnamed larger consumer coalition, which included 260 groups and individiuals in their March 15 letter. “Despite banks’ claims that these loans offer short-term, emergency solutions for their customers, banks have offered no data that would dispute that these loans are trapping their customers in long-term, high-cost debt. And despite efforts of many of the undersigned groups to engage directly with banks making payday loans; heightened negative media attention; and public expressions of concern from state legislators, state regulators and members of Congress, banks continue to make payday loans.”
The coalition included groups such as the AARP and AFL-CIO.
The Cities for Financial Empowerment Coalition wrote in its March 13 letter that “[r]esearch suggests that payday loans may actually push people out of the financial mainstream through involuntary closures of bank accounts,” and quoted an FDIC report on the topic that found “providing high credit on a recurring basis to customers with long lending increases institutions’ credit, legal, reputational and compliance risks, and can create a serious financial hardship for the customer.”