AGs Oppose Relaxing Rules on Payday Loan Businesses
Attorney General Jim Hood today joined 40 attorneys general to urge Congress to oppose a bill preempting states’ authority to crackdown on predatory high cost, short-term lending practices.
In a joint letter, state officials warned House Speaker John Boehner, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell about the negative effects of the Consumer Credit Access, Innovation and Modernization Act or H.R. 6139.
Many states have established their own framework of regulations to protect consumers from the risks associated with nonbank credit service providers. However, this legislation would allow these providers – including payday lenders, installment lenders, car title lenders, prepaid card issuers and check cashers – the ability to obtain a federal charter and sidestep these more stringent state laws.
The bill would allow lenders to extend credit to consumers if there is a reasonable basis for believing the consumers can repay the loans, but without putting specific standards in place. The legislation also exempts loans with terms of one year or less from the disclosure requirements of the Truth in Lending Act and substitutes a cost metric.
“By preempting state laws, the proposed legislation would impede state efforts to immediately and directly protect consumers from harm,” said Attorney General Hood.
This bill was assigned to a congressional committee which will consider the legislation and determine whether to send it to the full House or Senate.
Also signing onto the letter were attorneys general from Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Georgia, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Vermont, Washington, West Virginia, Wisconsin and Wyoming.