WASHINGTON–The triple-digit APRs that are often charged lower-income borrowers by payday lenders may consistently get the headlines, but a new report finds the powerful financial firms behind the short-term loans have managed to block at least five federal investigations into their business practices since the start of 2022.
According to the Washington Post, it’s all “part of a broad and aggressive campaign by payday lenders to neuter or eliminate their chief watchdog agency in Washington.”
The Post reported the probes have stalled largely as a result of an industry-led lawsuit against the Consumer Financial Protection Bureau that now rests in the hands of the Supreme Court — “even as low-income borrowers beg regulators to crack down on alleged predatory lending.”
‘Unforgiving Repayment’
“The loans often feature unforgiving repayment timelines and annual interest rates well into the triple digits, leaving some of the neediest borrowers facing sky-high bills they cannot repay,” the Post reported. “For years, the CFPB has heard complaints about such practices. But companies that offer short-term or payday loans — including Ace Cash Express, Advance America, Advance Financial and Check ’n Go — have vigorously opposed federal regulation.”
Some of the those firms are behind the lawsuit that is now before the Supreme Court and which centers on the constitutionality of the Bureau.
‘Especially Beneficial’
“The legal uncertainty has proven especially beneficial to lenders staring down the prospect of federal enforcement. Some companies have successfully cited the pending Supreme Court decision to slow down ongoing CFPB investigations or fight off the agency’s recent punishments,” according to a Washington Post review of federal court filings and interviews with government and industry leaders.
The Post added that top lending executives, meanwhile, have donated generously this year to Republican lawmakers and presidential candidates who previously signaled they could restrain, if not eliminate, the Bureau.
Getting Rid of ‘The Cop on the Block’
“They are moving in several ways at once to eliminate the cop on the beat — or the effectiveness of the cop on the beat — to keep from being trapped in unaffordable debt,” Ellen Harnick, an executive vice president at the Center for Responsible Lending, a nonprofit that has advocated for the agency, told the Post.
But Jessica Rustin, the chief executive of Purpose Financial, the parent company of Advance America, told the Post customers broadly “appreciate what we have to offer,” adding of the lawsuit against the CFPB, “To me, it is about holding the bureau accountable.”
The report profiled some of the victims of eye-popping rates, including APRs as high as 652%. Moreover, a borrower who takes out $500 in Idaho, for example, might face an extra $1,000 in fees after they refinance their debt over a four-month period, Alex Horowitz, a project director who leads work on payday lending for Pew, told the Post.
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