Capitol building, Washington D.C.
A consumer group with credit union ties has joined with other consumer advocates to oppose an expected attempt to allow payday loans to slip under regulatory limits disguised by a different name.
The Center for Responsible Lending (CRL) said in a Nov. 20 news release that they expect payday lending advocates to introduce a bill modeled on last year’s H.R. 7428 that “would open the door for payday loan apps to take even more from the already stretched-thin paychecks of military service members and other workers.”
CRL is the policy arm of the Durham, N.C., nonprofit group operating two credit unions: Self-Help Credit Union ($2.1 billion in assets, 100,668 members as of Sept. 30) and Self-Help Federal Credit Union ($2.3 billion, 136,214 members).
CRL was among 189 groups that signed a 10-page letter sent to Congress last week asking that it prevent predatory lenders from disguising loans “with sky-high interest rates as harmless ‘earned wage access’ products.” CRL said last year’s bill falsely declared that these loans “are not credit” and therefore not subject to the Truth in Lending Act (TILA), which it said would “gut basic cost transparency and protections.”
The letter from CRL and the other groups said a bill like H.R. 7428 would:
- “Hide the true cost of borrowing by removing requirements to disclose loans’ Annual Percentage Rate (APR), a crucial standardized measurement of price;
- “Exempt payday loan app companies from needing to comply with the Military Lending Act’s consumer protections for service members, including a strong cost cap and ban on forced arbitration;
- “Encourage a business model where workers must pay to be paid; and
- “Fuel state-level efforts to dismantle safeguards against predatory payday loans.”
Nadine Chabrier, CRL’s senior litigation and policy counsel, said “a bill like last Congress’s H.R. 7428 would hand payday loan apps a free pass to trap service members in debt.”
“This type of legislation would prevent all consumers from making an apples-to-apples comparison of the cost of payday loan apps with other forms of credit,” Chabrier said.
Neither America’s Credit Unions nor the Defense Credit Union Council were among those signing the letter.
However, Jason Stverak, chief advocacy officer for the Defense Credit Union Council, said DCUC also opposes proposals that “weaken Truth in Lending Act protections and give cover to high-cost fintech products that routinely trap borrowers in 300–800% APR cycles.”
“Such schemes turn hardworking Americans—and especially our nation’s service members—into targets instead of consumers,” Stverak said.
“Military families are already aggressively targeted by payday lenders. The last thing they need is Congress creating new loopholes that predators will exploit.
Stverak noted credit unions have long provided payday-alternative loans (PALs), hardship loans, emergency assistance, and early-paycheck access programs designed to protect members from predatory cycles of debt.
“These programs work, and they have a proven track record across the country—especially within defense communities,” he said.
Asked for their position on the letter signed by CRL, America’s Credit Unions (AmCU) replied in an email that it is talking with its members and leagues to determine what position it should take on legislation similar to last year’s H.R. 7428.
“As one of the original consumer protectors, we remain committed to ensuring Americans have access to the financial services they need to meet their immediate and long-term needs,” AmCU said
Contact Jim DuPlessis at JDuPlessis@cutimes.com.
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