HUNTSVILLE, Ala. (WHNT) — President Obama came to Alabama Thursday to reveal the Consumer Financial Protection Bureau’s new proposals to stop predatory lending practices.
President Obama focused on the need for stronger laws and increased transparency with these businesses.
Obama said while payday lending establishments are marketed as a tool to meet consumers’ short-term credit needs, payday loans—and loans with similar structures like title loans or other installment loans—often trap families in an abusive and expensive cycle of debt and fees.
Eighty percent of payday loans are rolled over or followed by another loan within 14 days, and the average borrower stays in debt for about 200 days out of the year, according to the White House.
Obama says the effort has bipartisan support both in Alabama and federally. Obama met with local advocates, political leaders and consumer watchdog groups Thursday.
Alabama has more than its share of businesses known to prey on those who financially are most vulnerable. Payday loan centers have been the target of proposed legislation in this state for several years, a process WHNT has followed closely.
Almost two years ago, Governor Robert Bentley announced the creation of a database to help enforce a cap on how much a person could borrow through these payday loan centers. That database is tied up in litigation.
Sam Brooke, deputy legal director for the Southern Poverty Law Center (SPLC), a non-profit watchdog group that has fought for years to tighten regulations on predatory lenders, issued this statement.
“The Consumer Financial Protection Bureau announced much-needed proposals to stop the predatory lending practices that trap low-income consumers in high-cost, small-dollar loans, such as payday and car title loans. These common-sense safeguards are desperately needed to protect consumers in Alabama, a state where many vulnerable residents have found themselves trapped in debt by abusive payday and car title lenders,” Brooke said in a statement.
Brooke added that The SPLC has seen firsthand in Alabama – and across the south – how these lenders have profited off people who could not afford the terms of their loans.
Far too often, they do not act as a responsible lender and consider a person’s ability to actually pay back the loan.
“These lenders have proven that they care only about profits – not ethics or fairness to consumers. The bureau’s proposed rules are based on a simple principle: You should not offer loans to consumers unless they can afford to repay them. President Obama also recognizes the importance of these safeguards. They not only protect consumers, but can help stabilize and grow our economy,” Brooke writes.
SPLC officials say these proposals have a long way to go before they are finalized. They also do not fully address the many abuses documented by the SPLC. For example, the bureau’s current proposal still includes loopholes that could permit lenders to continue issuing triple-digit interest loans to people unable to afford them. If the South is to benefit from these proposals, we must see even stricter regulations that will force these lenders to behave in an ethical way, according to the SPLC.