The head of a Tennessee-based consumer advocacy group lauded as a ‘good start’ the federal Consumer Finance Protection Bureau’s proposed rules on small-dollar lending by the payday and car title loan industry, reports the Chattanooga Times-Free Press.
Charging the industry is filled with “loan sharks” and “predatory lenders,” Andy Spears, executive director of Tennessee Citizens Action, said at a news conference today that his group has unsuccessfully sought to curb the industry’s worst practices in the state Legislature but run into road blocks.
“Tennessee families pay more than $400 million a year in payday and car title lending fees,” Spears told reporters. “The average Tennessee borrower pays $490 in fees to borrow $300 for five months.”
Spears said “today’s proposed rule by the CFPB is a good start. It focuses on the ability to repay which is a critical element missing because the current standard is the ability to collect.”
In announcing the proposed federal rules, CFPB Director Richard Cordray said in a statement that “too many borrowers seeking a short-term cash fix are saddled with loans they cannot afford and sink into long-term debt.
“It’s much like getting into a taxi just to ride across town and finding yourself stuck in a ruinously expensive cross-country journey,” Cordray added.
But the Tennessee Flexible Finance Association is attacking the proposed federal rule, saying it threatens to ruin the industry and thereby restrict access to low-dollar loan credit for thousands of Tennesseans.
That would “force” borrowers to seek money from unlicensed “underground” lenders. the industry group said in a statement.
“The CFPB’s proposed rules will preempt decades old laws regulating the consumer finance industry in Tennessee,” said association member Tina Hodges, CEO of Advance Financial.
Hodges charged that “once again, the federal government is telling Tennesseans they know how to run the state better than our own elected officials. Restricting credit options will ultimately drive up costs for consumers, cause the loss of thousands of jobs in the state and force borrowers underground to unlicensed lenders.”
She also said that despite the CFPB’s assertions, its proposed rule would effectively “preempt in whole or part “Tennessee payday lending, title lending and installment lending laws.
Those law, Hodges added, were developed specifically to address Tennessee consumers’ needs “unlike the untested one-size-fits-all regulations that the CFPB has proposed.”
Citizen Action’s Spears, however, said those Tennessee-specific laws were largely developed by state lawmakers at the behest of the powerful payday and title loan industry.
Payday and title loan companies have contributed at least $2.1 million to Tennessee political candidates and committees between 2010 and 2014, said Spears, who added that has left “the deck so clearly stacked against Tennesseans.”
Noting he met a wall over the last two years pushing some proposed curbs in the Legislature, Spears said “we don’t have $2.1 million to give to Tennessee politicians.”