Predatory loans: a neglected business story that hurts American consumers
If you’re looking for a business story to intrigue your readers, try one on Predatory Lending, something that involves the ever popular topics of money, politics, and consumer debt.
In October 2017, the Consumer Financial Protection Bureau released rules limiting the scope of payday lenders who provide short-term, high-interest loans with annual percentage rates that can skyrocket to 400%. President Trump responded by sacking Richard Cordray and appointing Mick Mulvaney, who froze the agency’s enforcement policies.
This story affects 28% of the American population, or more than one in four American consumers. Have your editor develop a special investigative series or report after reviewing payday lending practices in your area of coverage.
What’s going on at the Capitol?
Shortly after President Trump appointed Mick Mulvaney, the House of Representatives, by a vote of 225 to 16, passed legislation overturning the government watchdog rule. HR 3299 allows payday lenders to transfer loans to a third party, such as a bank, regardless of state law.
In 2016, borrowers who took out payday loans spent $ 9 billion in fees, according to the Pew Charitable Trusts. Since 1989, the breakdown industry contributed $ 13 billion to congressional campaigns, according to opensecrets.org, the website for the Center for Responsive Politics. To hear both sides of the story, you can contact Christopher Peterson at the Consumers Federation of America, and Dennis Shaul, CEO of the Consumer Financial Services Association of America, the industry’s leading lobbying association.
What is your state’s position on predatory loans?
The majority of states (37) have “specific statutes that allow payday loans”, reports the National Conference of State Legislatures. Eight states (Connecticut, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Vermont, and West Virginia), in addition to the U.S. territories of Guam, Puerto Rico, and the Virgin Islands, do not allow payday loans and / or require lenders to comply with interest rate caps, while three others (Arizona, Arkansas, and North Carolina) and the District of Columbia have repealed or allowed pre-existing legislation to expire.
What is the position of your state on the issue?
What alternatives to payday loans are there?
Community groups have come up with alternatives to payday loans that include government-run public banks and US post office banking. Consumers who currently pay more than $ 2,400 per year in interest and fees to payday lenders do not have access to a traditional bank. the advantages of banking at the post office, argues this 2014 white paper from the Inspector General of the US Postal Service. Find out if any groups in your area are behind these movements and what resources local groups may have to offer to consumers using payday loans.
National sources such as Nick Bourke, director of the Pew Charitable Trusts Small Loans Project; Lauren Saunders, associate director at the National Consumer Law Center; and Bruce McClary, executive director of the nonprofit National Foundation for Credit Counseling are good sources for this story.