United States Senator from Oregon Jeff Merkley partnered with Representatives Suzanne Bonamici (D-OR-01) and Pramila Jayapal (D-WA-07) to introduce the Stop Electronic Lending Fraud and Abuse Act (SAFE ).
The SAFE Lending Act will protect consumers from deceptive and predatory practices that strip working families of wealth by cracking down on some of the worst abuses stemming from the payday lending industry, particularly payday lending. payday online, according to a statement from Merkley.
Under the direction of the Trump Administration, the Consumer Financial Protection Bureau (CFPB) changed the course of national regulations that protect consumers from payday loan predators. Without strong CFPB protections at the national level, state laws that protect consumers will be even more important.
“Before we drove payday lenders out of Oregon, I saw up close how payday lenders trapped families in my blue-collar neighborhood in an inescapable vortex of debt,” Merkley said. “This legislation will ensure important consumer protections, protect state laws like Oregon’s, and create guardrails to prevent consumers from being trapped in an endless cycle of debt. American families work hard to earn an income, and they shouldn’t end up with their financial foundations ruined just because of a medical emergency or surprise car repair.”
“It is unacceptable that predatory lenders continue to trap consumers in a cycle of debt, taking advantage of families and individuals in times of financial hardship,” said Congresswoman Bonamici. “I am pleased to lead the SAFE Lending Act with Senator Merkley and Representative Jayapal to protect consumers across the country from these unscrupulous and dangerous practices and provide the necessary transparency.”
“Working families across the country do not deserve to have payday lenders take away their hard-earned savings and continue to use predatory tactics to trap people in debt,” said Congresswoman Pramila Jayapal. “The SAFE Lending Act will provide important safeguards to ensure workers and their families are protected from payday lenders and end dangerous practices that trap consumers.”
Many states have enacted strict laws to stop predatory lending, but payday predators have continued to use online lending to take advantage of consumers by hiding behind layers of anonymously registered websites and “lead generators” to evade the application.
Payday lenders with access to consumers’ bank accounts are also issuing loan money on prepaid cards connected to those accounts, which come with steep overdraft fees. When these cards are overdrawn, the payday lender can reach into the consumer’s bank account and collect the overdraft fee, racking up more debt. Even when the loan violates the law, predatory payday lenders can drain consumers’ bank accounts before people have a chance to assert their rights.
The SAFE Lending Act of 2022 would enact three fundamental principles to make the consumer lending market safer and more secure:
1. Ensure that consumers are in control of their own bank accounts
· Ensure that a third party cannot gain control of a consumer’s account through Remotely Created Checks (RCCs): Checks on a consumer’s bank account created by a third party. To prevent unauthorized RCCs, consumers could pre-authorize exactly who can create an RCC on their behalf, for example, when traveling.
· Allow consumers to cancel an automatic withdrawal in connection with a small loan. This would prevent an Internet payday lender from removing a checking account without the consumer being able to stop it.
2. Allow consumers to regain control of their money and increase transparency
· Require all lenders, including banks, to comply with state rules for the small money loans, similar to payday, that they can offer to customers in one state. Many individual states currently have much stricter laws than the federal government. There is currently no federal cap on interest or a limit to the number of times a loan can be renewed.
· Increase transparency and create a better understanding of the small 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 consumer funds and add to the already exorbitant costs of payday lending.
· Require the CFPB to monitor any other fees associated with prepaid payday cards and issue a rule prohibiting any other abusive fees on prepaid cards.
3. Ban Lead Generators and Anonymous Payday Loans
· Some websites describe themselves as payday lenders, but are actually “lead generators” that collect applications and auction them off to payday lenders and others. This practice is fraught with abuse and has led to fraudulent debt collection.
· The SAFE Lending Act prohibits anonymously registered lead generators and websites from payday lending.
Joining Merkley in the Senate, the SAFE Lending Act is cosponsored by Senators Edward J. Markey (D-MA), Tina Smith (D-MN), Cory Booker (D-NJ), Bernie Sanders (I-VT) , Dick Durbin (D-IL), Tammy Duckworth (D-IL), 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).
Joining Bonamici and Jayapal in the House, the SAFE Lending Act is cosponsored by Representatives Earl Blumenauer (D-OR-03), Jesus G. “Chuy” Garcia (D-IL-04), Sylvia Garcia (D-TX – 29), Sheila Jackson Lee (D-TX-18), Eleanor Holmes Norton (D-DC-At Large) and Katie Porter (D-CA-45).
The SAFE Lending Act of 2022 is endorsed by Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Federation of America, National Association of Consumer Advocates, National Consumer League, National Consumer Law Center, Public Citizen, and UnidosUS.