Lawmakers Clash Over Payday Loan Problems
WASHINGTON ?? Lawmakers on Wednesday examined concerns about alternative loan products such as payday loans, although consensus on what changes, if any, needed for the industry remains elusive.
The Senate Banking Subcommittee hearing follows a new study released this week by the Bureau of Consumer Financial Protection, which offers a fresh look at how consumers use payday loans and the pitfalls they may be faced. The agency said it was set to release new regulations for the industry, which was previously subject to state rules.
But as the CFPB progresses, the partisan divide over the effectiveness and fairness of alternative loan products remains sharp in Congress, with several Republican lawmakers raising concerns about regulatory efforts they believe will bankruptcy. short-term lenders.
“What if you let free men and women decide what works for them?” Said Senator Pat Toomey, R-Pa., The top Republican on the Senate Financial Institutions Subcommittee. “I have to say that there is a breathtaking underlying arrogance by the presumption of rich people who have never been in these circumstances that they know better than those people who make these ‘silly’ decisions and borrow. money to these institutions. “
GOP senators also continued their attack on Operation Choke Point, a Justice Department investigation of online lending by dozens of banks and other companies. Critics argued that the investigation went beyond eradicating illegal activity and aimed to curb online lending, even by those who play by the rules.
“I absolutely support all efforts to uphold the law federal law, state law to eliminate any abuse, any predatory practice,” said Senator David Vitter, R-La. “However, having said that, I’m very concerned that this has expanded to shut down this whole industry, whether people are following the rules or not.”
Democrats, meanwhile, have raised concerns about the structure of short-term loan products ?? high interest rates and the cycle of debt that can follow ?? as well as the lack of other options available to borrowers in need of cash.
“I think we have a good understanding of the traditional short-term or payday loan models that have been around in the states for years, but I’m curious about the innovations … at the same time, help them build credit history that will steer them towards more traditional banking services, ”said Senator Robert Menendez, DN.J.
Senator Elizabeth Warren, D-Mass., Reiterated her support for a plan to provide alternative loans to low-income and rural families through post offices in areas where bank branches are scarce. She noted that bank branches are “quickly abandoning” low-income neighborhoods even as they open branches in wealthy areas.
“With post offices in every zip code, that would solve the access problem. In fact, 58% of post offices are in zip codes with zero or one bank branch,” she said. “The post office could take advantage of its infrastructure to ensure that low-income families have access to banking services, that rural families have access to banking services, and that these services are offered at a lower price.