WASHINGTON, DC [9/20/24] – Congresswomen Suzanne Bonamici (D-OR), Pramila Jayapal (D-WA), and Senator Jeff Merkley (D-OR) introduced legislation to protect consumers from predatory payday lending practices.
The Stopping Abuse and Fraud in Electronic (SAFE) Lending Act of 2024 would safeguard consumers as predatory payday lenders have continued to flourish online despite laws passed by many states to stop abusive lending. Internet lenders hide behind layers of anonymously registered websites and “lead generators” to evade enforcement and can empty consumers’ bank accounts before they have a chance to assert their rights.
“Predatory payday lenders rob hard-working individuals and families of their resources at a time when they are financially vulnerable,” said Congresswoman Suzanne Bonamici. “The SAFE Lending Act would finally put an end to the unscrupulous practices payday lenders use to trap consumers in an unending cycle of debt.”
“Predatory payday lenders trap hardworking Americans in an inescapable vortex of debt,” said Senator Jeff Merkley. “Before we kicked payday lenders out of Oregon, they preyed on families in my blue-collar neighborhood. We need strong consumer protections to break this cycle of endless debt for families across America.”
“Payday lenders take advantage of working families, struggling to pay medical bills or rent, by trapping them in a seemingly endless cycle of debt,” said Congresswoman Pramila Jayapal. “I’m proud to lead this legislation with Congresswoman Bonamici that would protect consumers across the country by closing loopholes, increasing transparency, and putting an end to these predatory lending practices. Congress has a responsibility to protect hardworking people from bad actors, and that’s exactly what we will accomplish with our SAFE Lending Act.”
The SAFE Lending Act is endorsed by the National Consumer Law Center (on behalf of its low-income clients), Consumer Action, Consumer Federation of America, Main Street Alliance, U.S. PIRG, and UnidosUS. It would:
1. Give Consumers Control of Their Own Bank Accounts
- Prevent third parties from gaining control of a consumer’s account through remotely created checks (RCCs) – checks from a consumer’s bank account created by third parties. To prevent unauthorized RCCs, consumers would be able to preauthorize exactly who can create an RCC on his or her behalf, such as when traveling.
- Allow consumers to cancel an automatic withdrawal in connection with a small-dollar loan. This would prevent an internet payday lender from stripping a checking account without a consumer being able to stop it.
2. Allow Consumers to Regain Control of their Money and Increase Transparency
- Require all lenders, including banks, to abide by state rules for the small-dollar, payday-like loans they may offer customers in a state. Many individual states currently have much tougher laws than the federal government. There is currently no federal cap on interest or limit on the number of times a loan can be rolled over.
- Increase transparency and create a better understanding of the small-dollar 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 consumers’ funds and to add to the already exorbitant costs of payday loans.
- Require the CFPB to monitor any other fees associated with payday prepaid cards and issue a rule banning any other predatory fees on prepaid cards.
3. Ban Lead Generators and Anonymous Payday Lending
- Some websites describe themselves as payday lenders but are actually “lead generators” that collect applications and auction them to payday lenders and others. This practice is rife with abuse and has led to fraudulent debt collection.
- The SAFE Lending Act bans lead generators and anonymously registered websites in payday lending.
The bill also requires the Government Accountability Office to conduct a study on access to capital on Tribal lands and directs the Consumer Financial Protection Bureau to promulgate rules to implement this legislation.
A one-page summary of the SAFE Lending Act can be found here. The full text of the legislation can be found here.
In the House, the legislation is cosponsored by Representatives Susan Wild (D-PA) and Katie Porter (D-CA).
In the Senate, the legislation is cosponsored by Senators Tammy Baldwin (D-WI), Richard Blumenthal (D-CT), Ron Wyden (D-OR), Chris Van Hollen (D-MD), Bernie Sanders (I-VT), Dick Durbin (D-IL), Edward J. Markey (D-MA), Martin Heinrich (D-NM), and Tina Smith (D-MN).
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