From: Erin Macey
Indiana Institute for Working Families
Indianapolis
Consumer advocates, faith leaders and veterans groups here in Indiana breathed a sigh of relief when House Bill 1319, the bill to expand payday loans, died in the Senate.
Preserving Indiana’s existing installment lending rate caps and criminal usury law is critical to protecting consumers, and we believe there is strong momentum to look at reforming the small loans statute — our existing payday loan law — in a future session.
But the protections we fought so hard to maintain at the state level could soon be gutted by Congress. Even as we worked to hold the line on interest rates in the state, some members of the Indiana delegation voted to pass House Resolution 3299, a “rent-a-bank” bill that would allow banks to partner with non-bank lenders or debt collectors and skirt our state laws.
It works like this: the banks, which are exempt from state caps and usury laws, but typically do not make high-cost loans due to their riskiness, could use their exempt status to make the loan and quickly offload it to a finance company or debt collector. Up to this point, when banks have attempted these arrangements, the practice has been quickly called out as an abuse of the National Bank Act pre-emption. HR 3299 would sanction these partnerships.
At the same time, the new acting director of the Consumer Financial Protection Bureau is signaling his intention to scrap or water down the payday rule, which took five years to develop and did not touch interest rates, but did offer some protections against abuse. The payday rule requires lenders to either assess a borrower’s ability to repay the loan and still meet other financial obligations — addressing the fundamental problem with the payday loan model — or limit loans per borrower to six in a 12-month period. Even though the rule appears to be at risk in Director Mick Mulvaney’s hands, some U.S. representatives are pushing a resolution that would kill the rule altogether. U.S. representatives from Indiana Trey Hollingsworth, Luke Messer and Jim Banks have signed on in support of the measure. The Senate recently introduced a companion resolution.
In other words, for those of us who think extremely high-cost installment lending harms borrowers and the economy, there is no time for rest and celebration. Our work must continue if we are to hold the line on the consumer protections we currently have in Indiana.
