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Payday lending abuses
Published:2015-07-07 Business
Payday lending abuses Along with 31 of their colleagues, Senators Patty Murray, Senator Maria Cantwell and Congressman Adam Smith have signed a letter calling on Consumer Financial Protection Bureau (CFPB) Director Richard Cordray to enact strong rules to protect Americans from being trapped in a cycle of debt by payday loans. Payday lending products carry a typical interest rate of 400 percent or more and are designed with terms borrowers often cannot meet. These loans are sold as a one-time quick fix, but in truth, the business model of payday lending depends on the borrower having to take out additional loans to cover basic necessities like food and rent. “We applaud Senators Murray and Cantwell and Congressman Smith for their leadership on predatory lending and the CFPB’s efforts to protect consumers from these predatory products,” said Marcy Bowers, director of the Washington Statewide Poverty Action Network. “The federal government has taken steps to protect US Service members from these products; it’s only right that they take action to provide all Americans similar protections.” Congressman Denny Heck also sent a separate, equally strong letter. “Calling it a payday loan or an installment loan matters little when you are talking about a product that comes with triple-digit interest rates and catches consumers in a debt trap. This is true regardless of whether the product is sold locally or nationally,” said Bowers. Bruce Speight, director of WashPIRG agreed, stating that the failed bill “would have created a product designed to trap Washington consumers in a cycle of high-cost, long-term debt. Failing on these legislative campaigns state by state, the payday industry is now trying to evade strong new rules that are being proposed by the Federal Consumer Financial Protection Bureau. This proposed rule is further evidence that now, with the Consumer Financial Protection Bureau, there is a consumer cop on the beat who is standing up for and protecting consumers in the financial marketplace.”
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