SAFE Lending Act: Congressional effort to protect consumers

Oregon’s U.S. Sen.
Jeff Merkley has teamed up with Reps. Suzanne Bonamici (D-OR-01) and Pramila
Jayapal (D-WA-07) to introduce the Stopping Abuse and Fraud in Electronic
(SAFE) Lending Act.

The SAFE Lending Act
will protect consumers from deceptive and predatory practices that strip wealth
from working families by cracking down on some of the worst abuses stemming
from the payday lending industry, particularly in online payday lending, according
to a release from Merkley.

Under the direction
of the Trump Administration, the Consumer Financial Protection Bureau (CFPB)
reversed course on national rules protecting consumers from payday loan
predators. Without strong CFPB protections at a national level, state laws
protecting consumers will be all the more important.

“Before we kicked
the payday lenders out of Oregon, I saw up close how payday lenders trapped
families in my blue collar neighborhood in an inescapable vortex of debt,”?
Merkley said.?“This legislation will ensure important consumer protections,
protect state laws like Oregon’s, and create guardrails to prevent consumers
from being trapped in an endless cycle of debt. American families work hard for
their earnings, and they shouldn’t end up with their financial foundations
ruined just because of one medical emergency or a surprise car repair.”

“It is unacceptable
that predatory lenders continue to trap consumers in a cycle of debt, taking
advantage of families and individuals in times of financial distress,”
Congresswoman Bonamici said. “I’m pleased to lead the SAFE Lending Act with
Senator Merkley and Rep. Jayapal to protect consumers across the country from
these dangerous, unscrupulous practices and to provide needed transparency.”

“Working families
across the country do not deserve to have their hard-earned savings stripped
away by payday lenders who continue to use predatory tactics to trap people
into debt,” Congresswoman Pramila Jayapal said. “The SAFE Lending Act will
provide important guardrails to make sure working people and their families are
protected against payday lenders and puts an end to the dangerous practices
that entrap consumers.”

Many states have
enacted tough laws to stop abusive lending, but payday predators have continued
using online lending to prey on consumers by hiding behind layers of
anonymously registered websites and “lead generators” to evade enforcement.

Payday lenders with
access to consumers’ bank accounts are also issuing the money from loans on
prepaid cards, connected to those accounts, which include steep overdraft fees.
When these cards are overdrawn, the payday lender then can reach into the
consumer’s bank account and charge the overdraft fee, piling on further debts.
Even when the lending violates the law, abusive payday lenders can empty
consumers’ bank accounts before individuals have a chance to assert their

The SAFE Lending Act
of 2022 would put into law three major principles to make the consumer lending
marketplace safer and more secure:

1. Ensure That Consumers Have Control of their Own Bank

· Ensure that a
third party can’t gain control of a consumer’s account through remotely created
checks (RCCs) – checks from a consumer’s bank account created by third parties.
To prevent unauthorized RCCs, consumers would be able to preauthorize exactly
who can create an RCC on his or her behalf, such as when traveling.

· Allow consumers to
cancel an automatic withdrawal in connection with a small-dollar loan. This
would prevent an Internet payday lender from stripping a checking account
without a consumer being able to stop it.

2. Allow Consumers to Regain Control of their Money and
Increase Transparency

· Require all
lenders, including banks, to abide by state rules for the small-dollar,
payday-like loans they may offer customers in a state. Many individual states
currently have much tougher laws than the federal government. There is
currently no federal cap on interest or limit on the number of times a loan can
be rolled over.

· Increase
transparency and create a better understanding of the small-dollar loan
industry by requiring payday lenders to register with the Consumer Financial
Protection Bureau.

· Ban overdraft fees
on prepaid cards issued by payday lenders who use them to gain access to
consumers’ funds and to add to the already exorbitant costs of payday loans.

· Require the CFPB
to monitor any other fees associated with payday prepaid cards and issue a rule
banning any other predatory fees on prepaid cards.

3. Ban 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 led to fraudulent debt collection.

· The SAFE Lending
Act bans lead generators and anonymously registered websites in payday lending.

Joining Merkley in
the Senate, the SAFE Lending Act is co-sponsored by Senators Edward J. Markey
(D-MA), Tina Smith (D-MN), Cory Booker (D-NJ), Bernie Sanders (I-VT), Dick
Durbin (D-IL), Tammy Duckworth (D-IL), Chris Van Hollen (D-MD), Dianne
Feinstein (D-CA), Ron Wyden (D-OR), Richard Blumenthal (D-CT), Kirsten
Gillibrand (D-NY), and Martin Heinrich (D-NM).

Joining Bonamici and
Jayapal in the House, the SAFE Lending Act is co-sponsored by Representatives
Earl Blumenauer (D-OR-03), Jesús G. “Chuy” García (D-IL-04), Sylvia Garcia
(D-TX-29), Sheila Jackson Lee (D-TX-18), Eleanor Holmes Norton (D-DC-At Large),
and Katie Porter (D-CA-45).

The SAFE Lending Act
of 2022 is endorsed by Americans for Financial Reform, Center for Responsible
Lending, Consumer Action, Consumer Federation of America, National Association
of Consumer Advocates, National Consumer League, National Consumer Law Center,
Public Citizen, and UnidosUS.