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Heinrich Cosponsors Legislation to Stop Predatory Payday Lending Practices

WASHINGTON — U.S. Senator Martin Heinrich (D-N.M.) cosponsored the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act, legislation that will safeguard consumers from predatory payday lending practices.

“Part of building an economy that benefits working people means cracking down on predatory lending practices that put folks into an endless cycle of debt,” said Heinrich. “With an incoming administration hellbent on weakening consumer protections, we need to ensure states have the tools needed to help consumers better protect themselves against abusive lending practices.”

Predatory payday lenders have flourished online despite laws passed by many states, including New Mexico, to stop abusive lending. Internet lenders hide behind layers of anonymously registered websites and “lead generators” to evade enforcement and can empty consumers’ bank accounts before they have a chance to assert their rights.

Specifically, the SAFE Lending Act would:

  1. Give consumers control of their own bank accounts.

  • Prevent third parties from gaining control of a consumer’s account through remotely created checks (RCCs). To prevent unauthorized RCCs, consumers would be able to preauthorize exactly who can create an RCC on their 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.

  1. 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 Consumer Financial Protection Bureau to monitor any other fees associated with payday prepaid cards and issue a rule banning any other predatory fees on prepaid cards.

  1. 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.

  1. Require the Government Accountability Office to conduct a study on access to capital on Tribal lands and directs the Consumer Financial Protection Bureau to promulgate rules to implement this legislation.  

The legislation is led by U.S. Senator Jeff Merkley (D-Ore.). Alongside Heinrich, the bill is cosponsored by U.S. Senators Tammy Baldwin (D-Wis.), Richard Blumenthal (D-Conn.), Ron Wyden (D-Ore.), Chris Van Hollen (D-Md.), Bernie Sanders (I-Vt.), Dick Durbin (D-Ill.), Tina Smith (D-Minn.), and Ben Ray Luján (D-N.M.). In the House, the legislation is led by U.S. Representatives Suzanne Bonamici (D-Ore.) and Pramila Jayapal (D-Wash.). 

The SAFE Lending Act is endorsed by the National Consumer Law Center, Consumer Action, Consumer Federation of America, Main Street Alliance, U.S. PIRG, UnidosUS, Greenlining Institute, and National Association for Latino Community Asset Builders.

A one-page summary of the bill is here. 

The full text of the bill is here.

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