Payday Loans Criticized at Grassroots Rallies in U.S.
Grassroots activists calling for stronger government limits on the payday loan industry took their message on Tuesday directly to the source: They protested in front of payday loan businesses at events in at least 10 states.
Their “ask” was straightforward: The federal government needs to protect consumers from an industry in which critics say offers high-interest, short-term loans that put millions of Americans in a debt trap.
The Consumer Financial Protection Bureau (CFPB) is considering new limits on the industry and collecting comments from consumers.
At the Tuesday rallies, community advocates wore bright yellow hazardous material suits and clutched signs that said: “PAYDAY LOANS. COMMUNITY HAZARD. CFPB: CLEAN IT UP.”
National People’s Action (NPA), which works on economic and social justice issues, helped organize the rallies.
“It’s time we started treating predatory payday lenders like the danger to our communities they truly are,” Liz Ryan Murray, NPA policy director, said in a statement.
“These high-interest lenders rob communities and families of their livelihoods and are every bit as toxic as an environmental disaster. The Consumer Financial Protection Bureau was created to protect working families from just this kind of abusive financial practice. Now, it’s time for action. The CFPB should implement real and lasting protections that will free consumers from the payday loan debt trap.”
The CFPB is expected to issue a proposal about the payday lending industry by the end of January. A final rule is expected later in 2015. The federal agency cannot regulate interest rates. But it could limit how long lenders can keep consumers in debt.
NPA said that 35 states permit some type of payday lending.
“While some states and cities have worked to pass local laws capping interest rates, federal laws still largely allow payday lenders to prey on vulnerable communities and benefit from borrowers’ financial hardship,” the grassroots group said in a statement.
NPA estimates that payday lenders earn $10 billion in annual fees by keeping about 12 million consumers in what they say is perpetual debt.
The annual interest rates for some loans can top 400 percent and there have been reports of lenders using pressure tactics against consumers so that they will continue to borrow more money, according to NPA.
Tuesday rallies were held in Colorado, Iowa, Missouri, Kansas, Maine, Minnesota, Illinois, Nevada, Idaho and Michigan.
National People’s Action is a network of grassroots organizations that works on economic and racial justice issues.