For nearly everything we consume, we rely on regulatory agencies to tell us what's safe and what's not. These regulations serve our needs and interests as consumers. Yet the past weeks have been rife with attempts to chip away at consumer protections on both the federal- and state-level. This is the continuation of a worrisome trend to end safeguards for vulnerable consumers.
At the federal-level, there has been action to fundamentally reform the Consumer Financial Protection Bureau, following the resignation of former Director and Obama-era appointee Richard Cordray and the appointment of the Bureau's (contested) Acting Director, Mick Mulvaney (here's a tally of what actions the Bureau undertook since Mulvaney's appointment.) Most notably, the Bureau announced it would engage in a rule-making process to reconsider its Payday Rule, which requires payday, auto-title, and certain high-cost installment lenders to determine a borrower's ability to repay before issuing a loan. The announcement comes after the Bureau added language to its description of responsibilities, including "identifying and addressing outdated, unnecessary, or unduly burdensome regulations."
At the state-level, lawmakers are entertaining two bills—HB 1319 and SB 416—that would create predatory lending products with triple-digit APR. HB 1319, which passed the House Insurance and Financial Institutions Committee on January 24, would authorize a new, longer-term installment loan product from payday lenders that would carry interest rates up to 222% APR. Indiana currently defines felony criminal loan sharking at 72% APR; however, HB 1319 exempts finance charges from the APR calculations, effectively, legalizing criminal loan sharking in the state.
At the hearing, veterans' coalitions, faith communities, and charitable and community groups testified in opposition to the bill. "The bill before you is not reform . . . It is a request for extreme loosening of Indiana's current installment loans that reach 71% APR. 72% APR is criminal loan sharking. What you are here today to decide is whether or not to legalize what is currently considered to be felony loan sharking," Erin Macey, IIWF Policy Analyst and Network leader, testified before the committee.
SB 416, which is expected to be assigned to a summer study committee, would allow banks, credit unions, and non-traditional lenders to skirt the criminal loan sharking statute and raise interest and fees on many types of consumer credit products. SB 325, a bill pioneered by Network co-lead organizations Prosperity Indiana and Indiana Institute for Working Families, caps APR at 36%—the rate the U.S. Department of Defense secured to protect active duty military members; as have 15 other states to protect borrowers from usurious loans.