Washington, DC- Oregon’s Senator Jeff Merkley, sponsor of the SAFE Lending Act, a bill to crack down on online payday lending, issued the following statement after the New York Times reported that JPMorgan Chase has changed internal policies to rein in some of the worst practices by online payday lenders:
“I’m glad to see JPMorgan take an initial step to protect its customers from predatory payday lending by allowing them to close their accounts. JPMorgan should go further, however, and block withdrawals by online payday lenders in states, like Oregon, where they are operating illegally. Closing the barn door after the horses are out is an inadequate remedy.
“The financial system should be helping families build wealth, not stripping them of it by allowing shadowy offshore agents to raid their customers’ bank accounts. We need to make sure that states – who have been at the cutting edge of protecting consumers from predatory payday lending – are able to enforce their laws that protect borrowers from such payday lenders.”
On February 23, The New York Times reported that major banks such as JPMorgan Chase were enabling online payday lenders in predatory acts, such as keeping accounts open that accountholders had asked them to close. This resulted in the loss of funds from customers to the payday lenders and in huge fees from JPMorgan. Today, JPMorgan Chase announced they will allow customers the power to halt withdrawals and close their accounts.
On January 29, Oregon’s Senator Jeff Merkley, Senator Tom Udall (D-NM), Senator Dick Durbin (D-IL) and Senator Richard Blumenthal (D-CT) introduced the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act (S. 172). The SAFE Lending Act would crack down on the worst practices of the online payday lending industry and give states more power to protect consumers from predatory loans.
The SAFE Lending Act has four main provisions:
Ensures That Consumers have Control of their own Bank Accounts
- Ensures that a third party doesn’t gain control of a consumer’s account through remotely created checks (RCCs), which are checks from a consumer’s bank account created by third parties. To prevent unauthorized RCCs, consumers will be able to preauthorize exactly who can create an RCC on his/her behalf (such as when traveling).
- Allows consumers to cancel a debit (just like they can cancel a check) in connection with a small-dollar (payday) loan. This would prevent an Internet payday lender from stripping a checking account without a consumer being able to stop it.
Closes Loopholes and Creates a Level Playing Field In State Usury Law Enforcement
- Requires all lenders, including banks, to abide by state rules for the small-dollar, payday-like loans they may offer customers in a state. At present, only states, and not the federal government, have laws to prevent 400% APR loans on ordinary borrowers.
Bans Lead Generators and Anonymous Payday Lending
- Some websites describe themselves as payday lenders but are actually “lead generators” that collect applications and auction them to payday lenders and others. This practice is rife with abuse and has even led to fraudulent debt collection.
- The SAFE Lending Act bans lead generators and anonymously registered websites in payday lending.
Stops Offshore and Other Illegal Online Payday Lending in Violation of State Law
- Gives 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.
- Carefully constructed not to negatively impact the Internet.
The legislation is endorsed by Americans for Financial Reform, Center for Responsible Lending, the Consumer Federation of America, Main Street Alliance, and dozens of other consumer and small business groups.