Submitted by Green America
Joint Statement by the following:
We applaud the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) for the proposed guidance they issued this week directing banks to stop making predatory loans that trap borrowers in a cycle of debt with 300% interest. Requiring banks to assess a borrower’s ability to repay and make loans that borrowers can afford to repay is just common sense. It is also a fair directive, since banks have received generous government support and currently borrow money themselves from the government at close to 0% interest.
We also are encouraged by the Consumer Financial Protection Bureau’s study of payday lending by banks and store-front lenders, released earlier this week. The CFPB examined extensive data and found that payday loans are repeatedly flipped by lenders at exorbitant interest rates, causing deep hardship to families.
The FDIC/OCC bank guidance, if adopted and fully enforced, would address longstanding concerns expressed by policymakers, advocates and concerned citizens. The banking regulators have heard opposition to bank payday lending from more than 157,000 citizens, 250 organizations, a number of civil rights leaders, and members of the Senate. In addition, several institutional investors have raised concerns about payday lending and its impact on consumers and banks alike.
The FDIC and OCC have been proactive in examining payday lending by banks, listening and investigating, and responding with necessary action. The Federal Reserve Board, which regulates two of the financial institutions currently offering bank payday loans, should do the same.
We welcome the proposed guidance for addressing payday lending by banks, but we also know that non-bank payday lending continues to trap thousands of vulnerable borrowers in debt. We urge the Consumer Financial Protection Bureau to act quickly and decisively to curb payday lending by all types of lenders.
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