Critics of payday lending are mobilizing to lend support for more stringent rules for the industry and are crying foul on the industry’s efforts to loosen the requirements, ahead of this week’s deadline for comments on a proposed federal regulation on payday loans.
The Stop the Debt Trap campaign, a coalition of consumer groups that favors tough rules on payday lending, said Wednesday that they expect their organizing to result in more than 400,000 comments to be submitted in favor of an aggressive final rule by the Consumer Financial Protection Bureau by Friday’s deadline.
Those comments were drummed up through an online portal hosted by the coalition in addition to on-the-ground efforts by the consumer, civil rights, faith and labor groups that make up the coalition, said Gynnie Robnett, a campaign director for Americans for Financial Reform.
The coalition expressed hope that their comments would counter and overwhelm the huge number of pro-industry comments, which they said the industry solicited or even coerced from their customers.
Nearly 190,000 comments have been published, a record for the agency, with far more to come. The industry says the vast majority are critical of the rule, and it expects a million responses from both sides.
Sen. Jeff Merkley, D-Ore., said in a call organized by the group that he suspected that most of the comments defending the industry were orchestrated by payday lenders.
He encountered similar circumstances when he passed regulations on payday lending in Oregon as House speaker there, Merkley said.
He received bags of letters from payday customers opposed to the regulation. But when he began calling the authors of the letters to speak to them, “not a single family” opposed the proposed rules, leading him to suspect that they were forced into writing the letters at the counter while applying for loans.
Merkley, a member of the Senate Banking Committee and a frequent advocate of tighter financial regulations, said he believed that the industry was undertaking a similar effort for the bureau’s rule proposal.
Payday lending, he said, is “not a life raft. It’s an anchor” that drags families deeper into debt.
The bureau’s proposed rules were announced in June with the aim of ending “debt traps” that result when people in urgent need of cash end up relying on a string of expensive payday loans.
Under the rules, lenders would be restricted from extending loans that weren’t designed to be repaid on time, either by ascertaining that borrowers have the ability to repay or through other restrictions. The rules would apply to auto title loans and other forms of short-term, small-dollar lending.
Lenders have warned that the proposed rules would essentially wipe out the industry, forcing people with urgent borrowing needs into even more expensive forms of credit, such as bouncing checks.
However, the rule’s advocates, including Democratic members of Congress, have called on the bureau to tighten the restrictions in the final rule, especially by writing them so that lenders are not able to offer loans with annual percentage rates over 300 percent.
