By Thomas G. Wolfe, J.D.
Recently, in a letter to members of Congress, Americans for Financial Reform and over 200 other consumer and community groups jointly urge opposition to the “Consumer Protection and Choice Act” (H.R. 4018). Characterizing the proposed measure as one that would hamper the Consumer Financial Protection Bureau’s ability to protect consumers against high-cost payday, car title, and installment loans, the groups assert that the bill would delay the CFPB’s rulemaking in the small-dollar loan marketplace “for two years or longer.” Moreover, the groups’ Dec. 15, 2015, letter maintains that H.R. 4018 would allow the payday lending industry to avoid federal regulation altogether by “pushing an industry-backed proposal based on a Florida law that has proven ineffective at stopping the payday loan debt trap.”
By way of background and as previously reported in the Dec. 4, 2015, issue of the Banking and Finance Law Daily, H.R. 4018 was introduced by Republican representatives Dennis A. Ross, Carlos Curbelo, and Bill Posey, together with Democrats Patrick Murphy, Alcee Hastings, and Corrine Brown. The bill would amend the federal Truth in Lending Act by exempting any state that has in effect a “covered deferred presentment law” from any CFPB regulations governing deferred presentment transactions and deferred presentment providers. In addition, the law or regulation must meet other specified requirements governing the use of a transaction database, background checks for licensing, interest rate and fee limitations, and the treatment of past due amounts.
However, from the consumer and community groups’ perspective, the Consumer Protection and Choice Act is a misnomer. In their letter to congressional members about the proposed legislation, the groups maintain that H.R. 4018 “is not an effort to reform the payday loan market—it is an attempt to codify industry-backed practices that do little to protect consumers.” Accentuating this point, the groups contend that H.R. 4018 is largely based on a faulty Florida model that would harm consumers by “putting a stamp of approval” on: (i) triple-digit interest rates; (ii) back-to-back lending arrangements without proper consideration of a consumer’s ability to repay; (iii) actions facilitating a consumer’s long-term cycle of debt; and (iv) the imposition of excessive, burdensome fees on lower-income consumers.
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