Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, delivered the following opening statement during a full Committee hearing entitled, “Rent-A-Bank Schemes and New Debt Traps: Assessing Efforts to Evade State Consumer Protections and Interest Rate Caps.”
As Prepared for Delivery
In November of last year, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued a proposed rule that would provide legal cover for predatory rent-a-bank schemes, where payday lenders partner with banks to peddle harmful short-term triple digit interest rate loans in states that have reasonable, and often voter-approved interest rate caps to protect consumers.
Even if a state—like my home state of California—has passed a law setting a usury rate cap, this rule would allow lenders to ignore the law and to import high-rate, high risk, and otherwise illegal loans back into the state. Low-income consumers who are already struggling will pay the price.
American consumers used to be able to look to their regulators to protect them from these kinds of predatory schemes. Not so under the Trump Administration, where consumer protection takes a back seat to consumer predation. And Trump’s regulators are working overtime to make sure that bad actors have a clear path to trap millions of Americans in an unending cycle of debt.
This anti-consumer rule is just the latest to benefit predatory payday lenders. When Trump’s Acting Chief of Staff Mick Mulvaney was running the Consumer Financial Protection Bureau, or CFPB, he did everything he could for predatory payday lenders, including withdrawing a lawsuit against a group of deceptive payday lenders who were allegedly ripping off consumers with loans with interest rates as high as 950 percent a year. It’s little wonder that a CEO of a notorious payday lender thought nothing of submitting her resume to be considered as the next CFPB Director.
But the job instead went to Kathy Kraninger who is no doubt making that CEO proud. Director Kraninger has both delayed and proposed to undermine key provisions of the CFPB’s important Payday, Small-Dollar, and Car Title rule, which would have curbed abusive payday loans. I and 101 other House Democrats wrote to Kraninger to call on her to reconsider this effort, but she has not relented.
Today we will examine the implications of regulators’ actions to open the payday loan floodgates and the impact this will have on states with sensible interest rate caps. We will also discuss H.R. 5050, the Veterans and Consumers Fair Credit Act, Congressman Garcia’s bipartisan bill to place a federal 36 percent Annual Percentage Rate usury cap on payday loans and car-title loans, and extend the protections that active duty servicemembers have under the Military Lending Act (MLA) to all consumers across the country.
It is long overdue for Congress to take action to ensure that all Americans are protected from harmful payday products with sky-high interest rates.
On February 26, the full Committee will convene for a hearing entitled, “Rent-A-Bank Schemes and New Debt Traps: Assessing Efforts to Evade State Consumer Protections and Interest Rate Caps (Part 2).”