11.16.22

Durbin, Duckworth Join Merkley In Introducing Legislation to Protect Consumers From Predatory Payday Lending Practices

WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL) and U.S. Senator Tammy Duckworth (D-IL) joined U.S. Senator Jeff Merkley (D-OR), along with U.S. Representatives Suzanne Bonamici (D-OR-01) and Pramila Jayapal (D-WA-07), in introducing the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act. The SAFE Lending Act will protect consumers from deceptive and predatory practices that strip wealth from working families by cracking down on some of the worst abuses stemming from the payday lending industry, particularly in online payday lending. 

“Too many hard-working Americans have suffered long-term financial harm from predatory payday lenders and their deceptive tactics. We must put an end to this industry’s abuse,” said Durbin. “The SAFE Lending Act will keep consumers in control of their finances and ban manipulative practices. We cannot allow payday lenders to exploit American consumers any longer.” 

“The payday lending industry has long preyed on American consumers and no working family should have to worry that these predatory practices could strip them of their hard-earned money and put them into debt,” said Duckworth. “I'm proud to have co-sponsored the SAFE Lending Act so we can help rein in the financial abuses of the payday lending industry and protect the pocketbooks of working families.”

Many states have enacted tough laws to stop abusive lending, but payday predators have continued using online lending to prey on consumers by hiding behind layers of anonymously registered websites and “lead generators” to evade enforcement. Payday lenders with access to consumers’ bank accounts are also issuing the money from loans on prepaid cards, connected to those accounts, which include steep overdraft fees. When these cards are overdrawn, the payday lender then can reach into the consumer’s bank account and charge the overdraft fee, piling on further debts. Even when the lending violates the law, abusive payday lenders can empty consumers’ bank accounts before individuals have a chance to assert their rights. 

The SAFE Lending Act of 2022 would put into law three major principles to make the consumer lending marketplace safer and more secure:

1. Ensure That Consumers Have Control of their Own Bank Accounts

  • Ensure that a third party can’t gain control of a consumer’s account through remotely created checks (RCCs) – checks from a consumer’s bank account created by third parties. To prevent unauthorized RCCs, consumers would be able to preauthorize exactly who can create an RCC on his or her behalf, such as when traveling.
  • Allow consumers to cancel an automatic withdrawal in connection with a small-dollar loan. This would prevent an Internet payday lender from stripping a checking account without a consumer being able to stop it. 

2. Allow Consumers to Regain Control of their Money and Increase Transparency

  • Require all lenders, including banks, to abide by state rules for the small-dollar, payday-like loans they may offer customers in a state. Many individual states currently have much tougher laws than the federal government. There is currently no federal cap on interest or limit on the number of times a loan can be rolled over.
  • Increase transparency and create a better understanding of the small-dollar 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 gain access to consumers’ funds and to add to the already exorbitant costs of payday loans.
  • Require the CFPB to monitor any other fees associated with payday prepaid cards and issue a rule banning any other predatory fees on prepaid cards.

3. Ban Lead Generators and Anonymous Payday Lending

  • Some websites describe themselves as payday lenders but are actually “lead generators” that collect applications and auction them to payday lenders and others. This practice is rife with abuse and has led to fraudulent debt collection. 
  • The SAFE Lending Act bans lead generators and anonymously registered websites in payday lending.

Joining Durbin, Duckworth, and Merkley in the Senate, the SAFE Lending Act is also co-sponsored by U.S. Senators Edward J. Markey (D-MA), Tina Smith (D-MN), Cory Booker (D-NJ), Bernie Sanders (I-VT), 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). 

The SAFE Lending Act of 2022 is endorsed by Americans for Financial Reform, Center forResponsible Lending, Consumer Action, Consumer Federation of America, National Association of Consumer Advocates, National Consumer League, National Consumer Law Center, Public Citizen, and UnidosUS.

Final bill text can be found here.

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