Wednesday, September 17, 2014

Senator Jeff Merkley introduced the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act, the second bill introduction in a weeklong effort to highlight the need to protect consumers. The SAFE Lending Act would crack down on the worst practices of the online payday lending industry and give states more power to protect consumers from predatory loans.

"We threw the payday lenders, who prey on families when they're at their most vulnerable, out of Oregon back in 2007," said Merkley. "Technology has taken a lot of these scams online, and it's time to crack down.  Families deserve a fair shake when they're looking to borrow money, not predatory loans that trap them in a vortex of debt."

Many of these short-term payday loans involve exploding interest rates, eventually accruing interest of 500 percent or higher. Over twenty states have passed legislation to stop abusive lending, but these efforts have been challenged by the growing online presence of payday lenders.

The SAFE Lending Act has four main provisions:

Ensures That Consumers have Control of their own Bank Accounts

·         Ensures that a third party doesn't gain control of a consumer's account through remotely created checks (RCCs), which are checks from a consumer's bank account created by third parties. To prevent unauthorized RCCs, consumers will be able to preauthorize exactly who can create an RCC on his/her behalf (such as when traveling).

·         Allows consumers to cancel a debit (just like they can cancel a check) in connection with a small-dollar (payday) loan. This would prevent an Internet payday lender from stripping a checking account without a consumer being able to stop it.

Closes Loopholes and Creates a Level Playing Field In State Usury Law Enforcement

·         Requires all lenders, including banks, to abide by state rules for the small-dollar, payday-like loans they may offer customers in a state.  Only states, not the federal government, have laws to prevent 400% APR loans.

Bans 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 even led to fraudulent debt collection.

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

Stops Offshore and Other Illegal Online Payday Lending in Violation of State Law

·         Gives the Consumer Financial Protection Bureau authority on its own behalf and upon petition by state Attorneys General or other local regulators to shut down payment processing for lenders that are violating State and other consumer lending laws through the Internet.

·         Carefully constructed not to negatively impact the Internet.

The legislation is endorsed by Americans for Financial Reform, Center for Responsible Lending, and the Consumer Federation of America.

As speaker of the Oregon House in 2007, Senator Merkley led the effort to protect consumers against abuses by the payday lending industry by imposing an interest rate cap of 36% on all consumer finance loans and limiting rollovers of short-term loans.

Merkley, a leader on consumer financial protection in the Senate, introduced legislation yesterday to keep consumers' credit from being harmed by paid-off medical debt. These bills are part of a series of legislation he is introducing to ensure that Oregonians are treated fairly and are not victims of scams in the financial marketplace.

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