Lawmakers and consumer advocates have launched a “Stop The Debt Trap” campaign nationwide that targets payday lenders and a reduction of payday loan restrictions and enforcement in Washington D.C.
The campaign comes after Sen. Dick Durbin, D-Illinois, and 42 other senators wrote a letter to the head of the Bureau of Consumer Financial Protection (CFPB), Mick Mulvaney, questioning his actions, which the lawmakers maintain only increase exorbitant payday loan debt.
In January, Mulvaney suspended a rule imposing tighter restrictions on short-term payday loans. The CFPB rule includes standards that lenders have to follow before issuing loans, such as verifying a borrower’s income and ability to repay the loan. Mulvaney also halted several investigations into predatory practices by payday lenders.
The “Stop the Debt Trap” movement also focuses on a joint resolution filed by Sen. Lindsey Graham, R-South Carolina, and Rep. Dennis Ross , R-Fla. The joint resolution seeks to repeal consumer protections from payday loans that were finalized in a CFPB rule in October 2017. The joint resolution would also prevent the CFPB from issuing a similar rule in the future.
“Payday loans trap people in a vicious cycle of debt with loans costing over 300 percent annual interest," said Scott Astrada, federal advocacy director at the Center for Responsible Lending, a consumer protection and advocacy organization. "The debt trap is their business model, with 75 percent of loan fees going to people trapped in more than 10 loans a year. This often leads to overdraft, involuntary bank account closures, delayed medical care, and bankruptcy.”
Americans for Financial Reform (AFR) argue that Mulvaney has made decisions that have harmed consumers and helped payday lenders. AFR points to the CFPB dropping a case against Golden Valley Lending and three other payday lending companies that charge interest rates up to 950 percent. According to a Reuters report, Mulvaney is expected to drop three other cases against payday lenders that had been previously approved for litigation.
“As de-facto head of the Consumer Bureau, Mick Mulvaney has taken a wrecking ball to consumer protections," U.S. Don Beyer, D-Va., said. "He is using the CFPB to undermine important rules that shield people from predatory payday lending practices.”
An initial press conference launching the “Stop The Debt Trap” campaign was held in Washington, D.C. Other events are expected in states such Illinois, Indiana, Maine, Montana, New Jersey, Tennessee, Virginia, and Wisconsin.