Time to Act on Payday Lending … Happy Birthday Consumer Financial Protection Bureau
Payday Lending…No Good For Consumers
It has been five years since the enactment of The Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau (CFPB). Today, the Bureau is working on rules to curb the abuses of the payday lending industry. In Indiana, payday lenders drain $70.5 million from residents annually. This is a loss to local economies. Payday lenders charge, on an average 14 day loan, 356 percent.
As the CFPB takes up this work, the Indiana Association for Community Economic Development (IACED) and Congressman Andre Carson sent the Bureau a message of strong encouragement. Congressman Carson said, “I was proud to vote for creation CFPB five years ago this month. After the financial crisis, it was absolutely critical to have a dedicated advocate for consumers and make sure they’re treated fairly. The CFPB has demonstrated its ability to fulfill its mission.
Indiana Desperately Needs to Focus on Job Growth, Ranked 40th in the Nation
Just yesterday I mentioned abusive payday lending practices to a friend of mine. He stated he used the loans a few times in his early 20s because he was irritated with his bank at the time. He had accrued multiple overdraft fees through his bank account, and never received adequate notice of the fees and quickly was in over his head with debt. He closed his account and vowed never to use the institution again. I began asking all the questions concerning the foundation issues of the payday loan business model. “How much interest did you pay per loan, did you ever get stuck in the cycle of churning your loans, what made you stop using them?”
He had paid about $53.00 per loan, did not get stuck in the cycle of refinancing his loans, but only stopped using them when he earned more income. So this got me thinking, how do most payday loan customers get out of it if they aren’t able to earn more income? Are there other options out there?
Although reports indicate the U.S. economy is growing steadily, Hoosiers continue to suffer from a lack of economic security and job growth. A comprehensive report recently released by the Corporation for Enterprise Development (CFED), based in Washington, D.C., shows that only 1.3% of Indiana residents own their own small business, receiving on average $1,492 for a small business start-up.[i] Many families struggle to meet their basic needs of food, child care, housing, health care, and transportation. Head of households are working multiple part-time jobs in an effort to make ends meet. It is time to focus not only on building assets to get by but to support families in building wealth for their long-term stability. The 2015 CFED scorecard provides rankings for all 50 states and District of Columbia on both the ability of residents to achieve financial security and policies designed to help them get there. Indiana has only adopted 1 of 10 policies that would help Hoosiers move up the economic ladder in the category of businesses and jobs.