Yesterday, Congresswoman Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, spoke at a press conference about the harms caused by predatory payday loans and the need for strong rules to protect victims from abusive practices.
Waters spoke alongside advocates from consumer, civil rights and faith-based groups to urge the Consumer Financial Protection Bureau to finalize strong rules to rein in payday lenders, following a proposal the Bureau released earlier this month. She also highlighted a recently released staff report on payday lenders skirting state law as further evidence of the need for a robust federal standard.
Waters also announced that she will soon ask her colleagues to sign on to a letter encouraging the CFPB to enact a strong, final payday rule.
Full text of the remarks, as prepared for delivery, are below:
Hello everyone. I am so pleased to be here today with Americans for Financial Reform, the Center for Responsible Lending, and leaders of our faith and civil rights communities. They have been on the front lines helping to protect consumers from predatory lending and raising awareness of the harms caused by payday loan debt traps.
As we all expected, the CFPB has received considerable backlash from both the payday lending industry and my colleagues across the aisle following their proposal on payday and installment loans. Many opponents argue that regulation should just be left to the states.
Yet, one of the very reasons that we granted the CFPB authority over payday lenders in the Dodd-Frank Act was because we knew the industry had a track record of using every tactic in the book to avoid complying with state consumer protection laws.
In fact, just last week, my office released a report revealing that in states like my home state of California and also in Florida, Ohio, Texas, and Colorado, lenders are exploiting gaps in the law to make triple-digit interest rate loans with minimal safeguards for consumers. They’re relying on things like, “claimed tribal sovereign immunity”; cooling-off periods that are too short; using affiliates to charge and collect additional fees; and changing their business license classification to escape accountability.
So while the CFPB’s rulemaking is an important step in the right direction, we also must be vigilant and make sure that the Bureau’s final rule avoids any of the weaknesses that lenders have used to continue trapping consumers in a cycle of debt.
Though the CFPB cannot enact a federal rate cap, it can enact strong regulations that do away with these loopholes. And if they get it right, the CFPB rules can bring relief to millions of borrowers stuck in predatory payday lending products without sufficient protections.
Today, myself and several Democrats will be offering an amendment to the financial services funding bill to preserve the CFPB’s right to rein in these abusive and predatory loans. Republicans want to maintain the status quo. They want to see the people that you work with—the stories that Director Cordray asked you to share—charged high fees, high interest, and locked in a never-ending cycle of debt. That’s not right. That’s why today I’m going to be fighting for the CFPB’s right to publish its rule.
But just fighting for the rule isn’t enough. We’ve also got to make sure that the rule is a strong as possible. So, soon, I will be urging my colleagues in Congress to join me in a letter to the
CFPB encouraging the Bureau to enact a strong, final payday rule. We must protect all consumers by ensuring that they have the ability to repay the debt before the loan is made and that loan debt is affordable, without excessive fees and charges.
One thing is for sure. The history of payday lenders exploiting state laws is an important lesson for the CFPB to heed as it moves forward on its rule. We must stop the debt trap once and for all.