Feds Flooded With Comments Over Payday Lenders

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Advance Financial store managers stuff 15,000 envelopes with handwritten customer comments to the federal government on a proposed rule that requires a data base on borrowers. Photo submitted

NASHVILLE, TN — A lot of people with lousy credit and no bank account are telling Uncle Sam to leave payday lenders alone because they have nowhere else to go.

Meanwhile, Tennessee Citizen Action Executive Director Andy Spears says people should ask friends, relatives, your boss and church before getting a loan with high interest rates.

That’s the conflict over title loans and payday lenders like Advance Financial, led by Michael Hodges. They’re arguing over Consumer Financial Protection Bureau plans.

Oct. 7 is the deadline for comments to CFPB which fined Wells Fargo $100 million for creating 2,000,000 bogus-accounts with fees customers didn’t know about.

Congress authorized CFPB to make lenders document borrowers’ ability to repay loans and limit refinancing the debt if interests multiply. That implies a national data bank on borrowers. Customers’ recurring comment: it’s none of the government’s business who’s getting a loan.

Yet problems exist.

“We all need to worry about Tennesseans getting too deep in debt, especially at loan shark interest rates,” U.S. Rep. Jim Cooper D-Nashville said. “Lots of lenders are tempting us to get in over our heads but then demand quick payment.”

Still, people aren’t forced into loans.

“Although the interest rates are high, as long as they are used responsibly, these micro loans can really help those who are in a tight spot and have no cash or credit cards,” Duran Bunch of North Nashville wrote to CFPB when getting a loan. North Nashvillian Daniel Trice wrote, “It helps me in tough situations.”

Hodges: customers aren’t told what comments to write; loans don’t depend on comments; tens of thousands were sent to CFPB; it’s another example of government run amuck; and payday lenders’ trade association fought to get CFPB records on public comments.

U.S. Rep. Steve Cohen D-Memphis says access to small-dollar credit doesn’t require regulators to ignore “any predatory practice or product feature that hurts borrowers.”

CFPB says 62 percent of payday loans are made to “consumers who end up taking out seven or more loans in a row,” Cohen says. And over two-thirds of title loan business comes from consumers who reborrow six or more times.

Community Financial Services Association of America Executive Director Ed D’Alessio says “The people who would be most affected … are … telling their stories.”

Spears says CFPB would impose consumer protections in Tennessee that exist in other states, and interest rates won’t be changed. Some states prohibit payday lending. Georgia allows title loans, but not payday loans.

Alabama law prohibits three payday loans at one time and there’s an electronic data base to keep track of it, Spears says. Similarly, Tennessee prohibits refinancing such loans a second time, but there’s no data base. Here, lenders rely on affidavits from borrowers saying they’re not over extended.

Alabama’s data base is funded by fees paid by borrowers, Spears says.

But what do people do if they’re broke and their car breaks down? Spears says a teacher paid a former student’s $250 loan and provided a no-interest loan. Spears withheld names. The student’s embarrassed. The teacher isn’t rich.

Before financial embarrassment, Spears says go to Metro Financial Empowerment Center counsellors to get financially stable. Citizen Action wants credit unions to offer small, short-term loans.

Send comments to FederalRegisterComments@cfpb.gov, or Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G St., NW, Washington, DC 20552.

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