News
Attack on Minorities, Unbanked Consumers
Measure in Congress would undermine CFPB enforcement and preempt state laws
A
t the urging of veteran Michigan
Congressman John H. Conyers, a
R ESPONSIBLE
growing number of Congression-
L ENDING
al Black Caucus colleagues are actively
opposing a bill that would negatively
Charlene
impact consumers of color and others
Crowell
who lack a personal bank account. More-
over, the bill, HR 6139 would also
remove the Consumer Financial Protec-
tion Bureau (CFPB) from its current
enforcement authority over non-bank
lenders and additionally preempt state laws enacted to pro-
tect consumers.
Joining Rep. Conyers in vocal opposition are members of
Congress representing minority-majority districts. In a
Sept. 14 letter to the full House, Conyers, along with Rep-
resentatives Hansen Clarke (Detroit), Elijah Cummings
(Baltimore), Delegate Eleanor Holmes Norton (DC), Bar-
bara Lee, (Oakland), Charles Rangel (New York City) and
Bobby Rush (Chicago) spoke directly to the effort to estab-
lish a two-tiered financial regulatory system.
HR 6139 claims to
help minorities, when in
fact it would hurt them
disproportionately by
enabling predatory lend-
ing. Far from helping
these communities stay
in the mainstream bank-
ing system, the Office of
the Comptroller of the
Currency charter would
push them further into
the economic margins.
HR 1639 would pre-
empt
anti-predatory
lending laws in 17 states
and District of Columbia
while also circumventing
CFPB oversight of non-
bank creditors.
Additional concerns regarding HR 6139 include:
— Carve-outs for the same lenders the Department of
Defense found harmful to military families. After a 2006
Department of Defense report that found predatory lending
practices targeted military members and their families, a
bipartisan effort led to the enactment of the Military Lend-
ing Act of 2007. This law covered payday, car title and
refund anticipation loans and also put an end to interest
rates that ran as high as 800 percent. Interest rates on these
loans were capped at 36 percent.
— Roll backs more than 40 years of consumer protections
under the Truth in Lending Act (TILA). By exempting
lenders from annual percentage rate (APR) disclosure,
loans of one year or less could disclose the cost of these
loans as a dollar amount rather than an APR that TILA now
requires. Without an APR, disclosure on these loans, con-
sumers would be less likely to make a baseline cost of cred-
it comparisons with other financial products.
Additionally the Center for Responsible Lending research
and analysis has found that:
— Twelve million Americans are trapped every year in a
payday loan debt cycle and generate $4.2 billion in preda-
tory fees every year.
— States that ban payday lending save their citizens an
estimated $1.4 billion in predatory lending fees each year.
— Seventy-six percent of payday loans are the result of
repeat borrowing on the same principal.
— From 2008-2010, voters in three states have said ‘NO’
to triple digit interest rates when their state legislatures did
not: Arizona, Montana and Ohio.
Considering the economic chaos caused by the worst
economy since that of the 1930s Great Depression, many
lawmakers and consumers have called for more vigorous
monitoring and enforcement. Already, more than five mil-
lion consumers have turned to the CFPB
for information, assistance and advice.
Better than one-in-four consumers filing
a complaint with CFPB have received
monetary compensation.
When Capitol Hill lawmakers return
for the lame duck session that follows
the November election, HR 6139 and
other non-regulatory measures could
reach a House floor vote.
“Economic justice and financial freedom for all American
households must remain priorities for Congress and finan-
cial service regulators alike,” said the CBC members. “We
urge you to oppose HR 6139 and allow the CFPB to con-
tinue its work of facilitating a transparent and safe financial
marketplace for all households.”
Charlene Crowell is a communications manager with the
Center for Responsible Lending.
Twelve million
Americans are
trapped every
year in a
payday loan
debt cycle and
generate $4.2
billion in
predatory fees
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October 10, 2012
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