Measure Would Undermine CFPB Enforcement and Preempt State Laws
At the urging of veteran Michigan Congressman John H. Conyers, a growing number of Congressional Black Caucus colleagues are actively opposing a bill that would negatively impact consumers of color and others who lack a personal bank account. Moreover, the bill, HR 6139 would also remove the Consumer Financial Protection Bureau (CFPB) from its current enforcement authority over non-bank lenders and additionally preempt state laws enacted to protect consumers.
Joining Conyers in vocal opposition are Members of Congress representing minority-majority districts. In a September 14 letter to the full House, Conyers, along with Representatives Hansen Clarke (Detroit), Elijah Cummings (Baltimore), Delegate Eleanor Holmes Norton (DC), Barbara Lee, (Oakland), Charles Rangel (New York City) and Bobby Rush (Chicago) spoke directly to the effort to establish a two-tiered financial regulatory system.
"HR 6139 claims to help minorities, when in fact it would hurt them disproportionately by enabling predatory lending. Far from helping these communities stay in the mainstream banking system, the Office of the Comptroller of the Currency charter would push them further into the economic margins.
HR 1639 would preempt anti-predatory lending laws in 17 states and the District of Columbia while also circumventing CFPB oversight of non-bank creditors.
Additional concerns regarding HR 6139 include:
Carve-outs for the same lenders the Department of Defense found harmful to military families. After a 2006 Department of Defense report that found predatory lending practices targeted military members and their families, a bipartisan effort led to the enactment of the Military Lending Act of 2007. This law covered payday, car title and refund anticipation loans and also put an end to interest rates that ran as high as 800 percent. Interest rates on these loans were capped at 36 percent.
Roll backs more than 40 years of consumer protections under the Truth in Lending Act (TILA). By exempting lenders from annual percentage rate (APR) disclosure, loans of one year or less could disclose the cost of these loans as a dollar amount rather than an APR that TILA now requires. Without an APR disclosure on these loans, consumers would be less likely to make a baseline cost of credit comparison with other financial products.
Additionally the Center for Responsible Lending Research and Analysis has found that:
1. Twelve million Americans are trapped every year in a payday loan debt cycle and generate $4.2 billion in predatory fees every year.
2. States that ban payday lending save their citizens an estimated $1.4 billion in predatory lending fees each year.
3. 76 percent of payday loans are the result of repeat borrowing on the same principal.
4. From 2008-2010, voters in three states have said 'NO' to triple digit interest rates when their state legislatures did not: Arizona, Montana and Ohio.