A 'pushover among federal regulators' suddenly shows guts
Payday Profits
NYT Editorial
The Office of the Comptroller of the Currency, which failed to control the reckless mortgage lending that helped cause the financial crisis, is widely regarded as a pushover among federal regulators. But the agency showed some welcome muscle and concern for consumer protection during a House hearing this week when it vigorously opposed a bill that would accelerate the growth of payday-style lenders who peddle predatory loans that can carry interest rates of 400 percent or more.
The bill would dilute the power of the federal Consumer Financial Protection Bureau, which currently has authority over these lenders, by shifting primary oversight to the comptroller’s office, whose central mission does not involve consumer protection. The bill would pre-empt state licensing and most consumer protection laws, allowing the payday-loan industry to expand even in states that have restricted it in the past to protect their citizens from abusive lending policies.
Payday loans are advertised as a convenient, short-term option for people who need a small loan that they quickly repay in full, often two weeks later. But the industry relies for its considerable profits on the fact that it can easily turn these short-term loans into long-term debt.
Struggling workers who borrow a few hundred dollars at a time are frequently unable to pay on time, which means they must borrow again right away or pay extension fees that enrich the lender but are not applied to principal. After four months, for example, a customer who has borrowed $400 for a fee of $60 will have paid about $480 — and will still owe the original $400.
(More here.)
NYT Editorial
The Office of the Comptroller of the Currency, which failed to control the reckless mortgage lending that helped cause the financial crisis, is widely regarded as a pushover among federal regulators. But the agency showed some welcome muscle and concern for consumer protection during a House hearing this week when it vigorously opposed a bill that would accelerate the growth of payday-style lenders who peddle predatory loans that can carry interest rates of 400 percent or more.
The bill would dilute the power of the federal Consumer Financial Protection Bureau, which currently has authority over these lenders, by shifting primary oversight to the comptroller’s office, whose central mission does not involve consumer protection. The bill would pre-empt state licensing and most consumer protection laws, allowing the payday-loan industry to expand even in states that have restricted it in the past to protect their citizens from abusive lending policies.
Payday loans are advertised as a convenient, short-term option for people who need a small loan that they quickly repay in full, often two weeks later. But the industry relies for its considerable profits on the fact that it can easily turn these short-term loans into long-term debt.
Struggling workers who borrow a few hundred dollars at a time are frequently unable to pay on time, which means they must borrow again right away or pay extension fees that enrich the lender but are not applied to principal. After four months, for example, a customer who has borrowed $400 for a fee of $60 will have paid about $480 — and will still owe the original $400.
(More here.)
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