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Senate bill would crack down on e-payday loans
WASHINGTON (2/7/13)--A bill has been introduced in the Senate intended to crack down on the worst practices of the online payday lending industry and give states more power to protect consumers from predatory loans.

Stopping Abuse and Fraud in Electronic (SAFE) Lending Act (S. 172) was introduced by Democratic Sens. Jeff Merkley (Ore.), Tom Udall (N.M.),  Richard Durbin (Ill.) and Richard Blumenthal (Conn.).

"We threw the payday lenders, who prey on families when they're at their most vulnerable, out of Oregon back in 2007," said Merkley when the bill was introduced. "Technology has taken a lot of these scams online, and it's time to crack down. Families deserve a fair shake when they're looking to borrow money, not predatory loans that trap them in a vortex of debt."

Credit unions and the Credit Union National Association are committed to providing a safe and affordable alternatives to predatory payday lenders, and credit unions across the country have implemented various programs in order to provide individuals in their communities an alternative to high-priced payday lenders.

CUNA supports the ability of credit unions to provide beneficial short-term, small amount loans as alternatives to predatory payday lending, which have "no place in the financial marketplace."

Payday loans from federal credit unions are generally limited to an annual percentage rate of no more than 18%, although there is some flexibility under the National Credit Union Administration's short-term, small amount loan program.

The Senate's SAFE Lending Act has four main provisions to:

  • Ensure that consumers have control of their accounts so that a third party doesn't gain control through remotely created checks (RCC). Consumers would be able to preauthorize may create an RCC on his/her behalf;
  • Allow consumers to cancel a debit, as they can a check,  in connection with a payday, thereby preventing an Internet payday lender from stripping a checking account without a consumer being able to stop it;
  • Require all lenders to abide by state rules for the small-dollar, payday-like loans they may offer customers in a state loans. Merkley's release notes that only states, not the federal government, have laws to prevent 400% annual percentage rate loans; and
  • Ban websites from describing themselves as payday lenders when they are actually "lead generators" that collect applications and auction them to payday lenders and others.
The bill, introduced Jan. 29, also would give the Consumer Financial Protection Bureau authority on its own behalf and upon petition by state Attorneys General or other local regulators to shut down payment processing for lenders that are violating state and other consumer lending laws through the Internet.
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