Payday loan legislation out of Florida
Democrats and Republicans constantly have heated debates regarding new legislation, party issues, and everything in between. While this seems to be the norm, there is one issue that both parties seem to have agreed upon: payday loans. You read that correctly. Legislators are taking aim at payday loans and they do not seem to have the consumer’s best interests at heart.
What is the legislation?
The legislation was introduced by Florida Congressman Dennis Ross and has been somewhat ironically named the Consumer Protection and Choice Act. The Act is being backed by the Chair of the Democratic National Committee, Debbie Wasserman-Schultz; also from Florida. The Act was drafted in response to the Consumer Financial Protection Bureau’s plan to create a set of rules intended to curb the more contemptible aspects of payday lending (hefty fees, sky high interest rates, and not enough time to repay the loan).
Wasserman-Schultz and Ross both want Florida to be the model by which all other states will follow. The problem is that Florida’s payday lending rules are not the ideal paradigm. The CFPB wanted to institute a set of rules that would protect the consumer by offering debt trap prevention and protection. The new bill falls short in some of the areas the CFPB wanted to cover. This was true not only for payday loans, but also for any credit product that requires consumers to pay back the loan in full within 45 days, so it would include deposit advance products, some vehicle title loans, and certain open-ended lines of credit.
That’s a good thing, right?
Well, it would be; except, the CFPB has yet to release its draft of rules. The proposed bill, would not only delay the CFPB’s efforts to structure payday lending, but would also exempt states with existing restrictions on payday lending. This is a huge problem for the consumer. The existing bill does not structure fees or interest in the way that the CFPB wanted to do. This is not good for small business owners and entrepreneurs. Often, entrepreneurs need these untraditional loans between paydays to make ends meet. This bill does not protect the consumer and you need to be aware of the pitfalls.
Why this matters
According to The Consumerist (via Huffington Post), in December, a letter [PDF] was sent to all members of Congress, along with members of the Consumer’s Union, noting that “in spite of the industry-backed Florida law, 88% of repeat loans were made before the borrower’s next paycheck,” and 85% of payday loans are issues to people who have taken out at least seven loans per year.
The Huffington Post cites data from Pew Charitable Trusts, stating the typical Florida payday borrower takes out nine loans in a year, and spends about six months of the year in debt. Pew calculated the average APR on Florida payday loans at 304%, not much of an improvement on the national average (where payday loans are allowed) of 390%. This is the model by which all other states will conform, if the bill passes. This doesn’t seem like much protection for the consumer.
Due to high interest rates and small amount of time to pay back the loan, borrowers are continually in debt (a no-win situation for small businesses using this loan method to survive).
FFEE Act wants to save you from having to pay to freeze your credit
(POLITICS NEWS) The FFEE Act wants to help give consumers more rights more control over how credit agencies use their data.
Following the compromise of consumer data from credit reporting bureau Equifax, Senator Elizabeth Warren (D-MA) and Senator Brian Schatz (D-HI) have introduced the Freedom From Equifax Exploitation (FFEE) Act.
This act aims to give consumers more rights more control over how credit agencies use their data.
The bill is available here, but here is a few of the bill’s highlights:
- Create a uniform, federal process for obtaining and lifting a credit freeze.
- Preventing credit reporting agencies from profiting off the use of consumer information for the duration of a credit freeze;
- Strengthening the fraud alert protection from 90 days to a one year, with a year renewable.
- In ID theft cases, a 7 year fraud alert is created.
- Require any credit reporting agency who charged a fee to freeze credit in response to the data breach to refund those fees,
- Allow for an additional free credit report (consumers already get one under the Fair Credit Reporting Act through annualcreditreport.com)
The most important feature here is the removal of any fee to freeze your credit. Currently, agencies like Equifax charge nominal fees to freeze credit (anywhere from 3-10) dollars. If this bill passes – not only will that service be free, but it will restrict the way credit agencies use that information while the freeze is active.
The idea behind making this free also keeps credit companies, whom many believe are responsible for the security of credit information, from profiting off information breaches. Given that many financial advisors have advised those impacted to freeze their credit, this would be a benefit to consumers.
It is important to note here that Equifax has suspended the fees to freeze credit for the next month.
A credit freeze restricts access to your credit report. Simply put, it requires the credit agency to contact you first to ensure it was you who applied for credit, thus making it harder for you to apply for credit. You would need to unfreeze your account to apply for new credit. You must also freeze credit with each bureau, which can lead to some expenses as you must pay anytime to lift a freeze.
Remember: a credit freeze doesn’t impact current accounts or your credit score. If you apply for credit often, or open new accounts often, then a credit freeze may not be for you.
Lots of names
The bill has several original co-sponsors, including Senators Sanders, Franken, and Blumenthal. Companies like the National Consumer Law Center, Americans for Financial Reform, CREDO, and the Consumer Federation of America all have also endorsed the bill.
President Trump disbands his business councils with one tweet
(POLITICS) President Trump has disbanded the councils that he previously very adamantly supported, so what happened?
We interrupt this regularly scheduled program
Huge news on the domestic policy front – per a Twitter announcement, President Trump’s two business advisory councils – the Strategic and Policy Forum and the Manufacturing Jobs Initiative – have been disbanded.
The sequence of events has been fast and difficult to follow, but here’s how things went down.
See ya later
On Monday, Kenneth C. Frazier, the CEO of pharmaceutical giant Merck, resigned from the Manufacturing Jobs Initiative in protest at President Trump’s comments on the recent violence in Charlottesville. By the evening of the same day, Brian Krzanich of Intel and Kevin Planck of Under Armour had done the same. They were quickly followed by Thea Lee and Richard Trumka of the AFL-CIO, Scott Paul of the Alliance of American Manufacturing, Denise Morrison of Campbell Soup and Inge Thulin of 3M.
This morning, in response to the sudden exodus, Stephen Schwartzman, chief executive of the Blackstone Group and longtime Trump business and political ally, led a conference call of the remaining council members this morning to debate how to proceed.
By the end, all members had resigned.
In short, President Trump is not disbanding his advisory councils in the sense of (no “The Apprentice” jokes, please) firing their members. The members already quit. The President’s Tweet simply announced that had taken place, and that, as it states he “disbanded” the now-vacant groups, there are presumably no plans in the near future to replace them.
This is a surprising move from the President. Historically the role of business advisory councils has been to keep an open communication pipeline between the President and the American business community, something this president has consistently identified as a priority. President Trump has always positioned himself as passionately pro-business, particularly concerned with global competitiveness and the loss of jobs and revenue in American manufacturing.
The Strategic and Policy Forum and the Manufacturing Jobs Initiative were founded specifically to address those issues.
The business community in particular had expected the President to draw heavily on their advice.
On the other hand, that advice has repeatedly conflicted with the President’s other policies. Well before Charlottesville, the Strategic and Policy Forum had seen high-profile resignations: Bob Iger of Disney and Elon Musk of Tesla (who served on, and resigned from, both the SPF and the Manufacturing Jobs Initiative) resigned over the President’s withdrawal from the Paris Climate Accord, and ex-CEO of Uber Travis Kalanick departed over restrictions on immigration from the Middle East.
President Trump’s elimination of his business advisory councils clearly indicates a new direction in the relationship between the White House and the American business community.
What that direction will be, and what consequences it will have for the economy, remain to be seen.
The House just voted to take away some important consumer rights
(POLITICS) If adopted by the Senate and the President, our banks, credit card companies, student loan companies, and other financial services will have a hall pass on all sorts of bad behavior.
Same story, different day
Big banks have won again, as they and other financial institutions continue to restrict consumer rights all in the name of “choice.” Well, choice for the companies that is.
The GOP controlled House just voted to introduce a Congressional Review Act Resolution that if passed by the Senate, will make it harder for consumers to have their day in court.
Bump the consumers, right?
The Resolution would overturn rules from the Consumer Financial Protection Bureau (CFPB) aimed at protecting consumer rights and keep financial institutions – like banks, credit card companies, and loan services – in check.
The rules center on the forced arbitration clause that is hidden among many contracts.
This clause allows consumers and companies the chance to settle issues behind closed doors without going through the legal system. That doesn’t sound too harsh at first glance, right? Well, of course there are a few caveats that allow the pendulum to swing in favor of financial companies.
Like the fact that there are no public records of these arbitrations, even if the company was found at fault.
Also, that consumers can choose between arbitration and the court system unless the company wants arbitration, then the choice is gone. Most importantly, forced arbitration severely limits class action lawsuits, which results in a lot less individual suits.
Wall Street wins again
Many bank-backed House representatives argued that class action lawsuits only result in a miniscule payout for consumers.
This may be true, but it is a smaller amount for a lot more people.
This means the company pays a larger amount to more mistreated consumers overall. House Democrats, none of which voted in favor of the Resolution, feel that this is another way for Wall Street to benefit from their ties to lawmakers. Without a chance to go to court, consumers are deprived of their rights simply by signing a contract.
There’s still hope
Consumers still have a chance if the Resolution is rejected by Congress. It will be more of a debate, since it would only take two opposing votes from the GOP side to reject it. Hopefully they will consider who the CFPB rules protect.
No consumers have raised issues to repeal them. It is a wish from the financial companies they have affected, and unfortunately their wish just may come true.
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