4 Ways Payday Lenders Are Being Put out of Business

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

 

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

Payday Lenders Going out of Business

The California Reinvestment Coalition has worked to restrict payday lending throughout California- both through defeating bad state bills that would increase the presence of harmful payday lenders in our communities, and through working with local cities (like Sacramento, San Francisco, Oakland, Oceanside, San Diego, San Jose) to limit the number of payday lenders that can operate in a city.

Our current efforts include our coalition work with the Coalition Against Payday Predators (CAPP) on local ordinances in Gilroy and Sunnyvale.  CRC is also working with allies in Fresno and Long Beach to restrict the presence of payday lenders in these cities.

The payday loan industry has used a variety of tactics to try and stay in business (we’ll post more on that in future), so we’re happy to see regulators and elected officials throughout the country are attacking these predators through several channels, including:

1) Stopping banks from facilitating online payday loans:  The Baltimore Sun reports that Mark Kaufman, commissioner with Maryland’s state division of financial regulation is going after banks that facilitate illegal online loans.  According to the article, “Maryland goes after payday lenders’ banks to stop illegal loans” (August 19, 2013), Kaufman has given the names of eight banks to federal regulators because he believes the banks should know they are facilitating these predatory loans by giving online payday lenders access to customer accounts.

2) Forcing online lenders out of the state, and out of business: We were happy to see Western Sky Financial announce that they would stop funding loans this week.  Without pressure from New York’s Attorney General, Eric Schneiderman, this company would likely have continued preying on desperate people.  According to Consumerist, “Online Payday Lender Western Sky To Stop Funding Loans Sept. 3” (August 27, 2013), officials in Oregon, Colorado, Minnesota, and Maryland have also sued the company.

3) Banning new payday lenders at the local level:  The city of Montgomery, AL, recently announced a temporary, 90 day ban on new business licenses for payday lenders and companies that provide car title loans.  According to the article, “Temporary Ban on New Business Licenses for Payday Lending Companies”, Birmingham and Tuscaloosa have enacted similar moratoriums.

4) Stopping payday lenders from accessing consumer bank accounts:  American Banker reported that banks are under strong pressure to limit payday lender’s access to consumer accounts.  The article, “ACH Online Lenders Go Bust Following New York Crackdown,” (Aug 28, 2013), explains that the industry-run electronic payments group Nacha warned banks that allowing access to customer accounts could be against Nacha rules.

Looking for an alternative to a payday loan?  The Federal Trade Commission has a post with 6 suggestions on alternatives to payday loans: Alternatives to Payday Loans (scroll down).

Are you a Californian who has used a payday loan and would like to share your story? Do you want to get involved in local efforts to restrict payday lending in our communities? If so, please contact Liana Molina, CRC’s Payday Campaign Organizer: Liana@calreinvest.org  or 415-864-3980.

To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via Twitter, watch our movies on our YouTube Channelsign up to receive our newsletter and action alerts, and of course, visit our website.

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