Here’s What You Can do to Stop Predatory Payday Lenders

Animated gif from stoppaydaypredators.org.

In Kansas City today, the Consumer Financial Protection Bureau—the independent government agency created by Senator Elizabeth Warren in the aftermath of the 2008 financial crisis—announced their new set of rules for payday lenders and other predatory loan operations. These are commonsense rules that no sane person should oppose; they’re guidelines that prevent some of the poorest, most desperate Americans from doing grievous harm to their own finances.

One rule, for instance, insists that lenders check to see if a borrower can realistically repay a loan. Imagine if you or I could walk into a bank and get a home loan without even a credit check beforehand. Predatory lenders are currently handing out money to people without ensuring first that they the capacity to pay the loan back within a reasonable amount of time. It sounds counterintuitive, but they obviously do this because their interest rates are so high that they can get people with bad credit histories on the hook for years a time, turning one bad decision into years of monetary gain for lenders.

Additionally, lenders won’t be allowed to offer a second loan within 30 days of a previous loan, unless the borrower can prove that their financial situation has significantly improved. Further, lenders won’t be able to offer more than three loans within a few months of each other. It’s a straightforward “waiting period” that allows borrowers to catch their breath and get a sense of their finances before burrowing even deeper into debt.

And finally, lenders won’t be able to repeatedly and without permission shake down the bank accounts of their customers, thereby saving consumers from untold millions in overdraft and penalty fees. Under the new rule, lenders will have to contact borrowers with written notice before requesting funds from their bank accounts, and they will be restricted to two attempts to request funds without the borrower’s permission.

None of these rules are prohibitive or confusing. Predatory lenders can continue to charge the exorbitant interest rates (400 percent is an industry norm) and fees they’ve always charged. These rules are simply providing a floor of civil behavior to keep Americans from harming themselves.

But of course the industry is going to fight these regulations. They always do. And as we know from our experience with the way businesses try to fight the minimum wage, they’re going to threaten that these rules will hurt the very Americans they’re intended to help, they’ll charge that the regulations will make the industry unworkable, and they’ll threaten a financial apocalypse that will render parts of the country unlivable. Like the anti-minimum wage charges, these complaints are not based in any kind of reality. They’re threats, not actual economic theory. But they’ll for sure roll them out in a highly organized (and likely well-funded) campaign to overturn the rules (or render them toothless) before they’re even adopted.

So what can you do to help? First and foremost, you can demonstrate your support by submitting a public comment on StopPaydayPredators.org. I know a lot of people assume that public comments and online petitions are pointless busywork, but they really do matter—I’ve talked with dozens of elected officials over the years who say that these online forms are the single best way to demonstrate support within the public sphere. You can bet that predatory lenders are already filing their own comments; your support will help stem the tide. Also, you can share StopPaydayPredators.org on social media. If you’re on Twitter, the handles @StopTheDebtTrap and @StopPaydayPreds will keep you updated on the latest developments, and the hashtag #StopTheDebtTrap will keep you connected to the community.

Many people—myself included!—have argued that the federal government’s response to the financial crisis was insufficient, that the banking industry wasn’t penalized enough for nearly destroying the economy. This is true. But these new rules demonstrate a great step forward; they will protect poor Americans from calamity. It’s incumbent on all of us to support the Consumer Financial Protection Bureau for getting this right, and for taking a small first step toward prioritizing the security of average Americans over the desires of the financial industry. This is the direction we want from our government; it’s our job to make sure they stay on course.