WASHINGTON–A bipartisan group of members of the House Financial Services Committee has come under scrutiny for pressing the Federal Reserve to extend an emergency loan program to payday lenders.
All 14 members of Congress, representing both parties, have accepted political donations from the industry, according to the Huffington Post.
“In other words, firms that offer Americans high-interest loans want a low-cost loan from the government,” observed the Post.
All 14 signatories of the April letter to the Federal Reserve are recipients of campaign contributions this election cycle from the political action committee of the American Financial Services Association.
“It’s bad on the substance to have the Federal Reserve be lending to subprime consumer and small business lenders,” Graham Steele, a former Democratic counsel on the Senate Banking Committee, who now runs Stanford School of Business’ Corporations and Society Initiative, told the Huffington Post. “It doesn’t look good when the members asking for that kind of bailout for these companies that are also funded by those predatory lenders.”
Writing to Federal Reserve Chairman Jerome Powell, the lawmakers encouraged the Fed to expand eligibility for loans from its Term Asset-Backed Securities Loan Facility, or TALF, for “non-bank lenders and fintech platforms,” the report noted.
The House members ― seven Democrats and seven Republicans ― were responding to a letter that the AFSA sent to Congress appealing for its members to become eligible for the program, according to the Huffington Post.
‘Much More Vital Role’
In the letter, the House members make clear that they specifically want TALF to include loans issued by “installment” lending firms that the program currently excludes. Those firms offer high-interest loans for low-income borrowers to pay off in installments.
“The market for consumer and small business credit, including consumer installment loans, play a much more vital role in the economy than they did twelve years ago,” the letter states. “In light of this development, we hope you agree that any expanded TALF program should include investment-grade securities backed by unsecured consumer loans as eligible collateral.”
In response, a number of critics have said the group represents lenders that by any other name are “predatory.”
The signatories on the letter, some of whom are strong supporters of credit unions, include Rep. Josh Gottheimer (D-NJ), Rep. Ed Perlmutter (D-CO), Rep. Vincente Gonzalez (D-TX), Rep. Denny Heck (D-WA), Rep. Bill Foster (D-IL), Rep. Jennifer Wexton (D-VA), Rep. Jim Hines, as well as Republican Rep. Lee Zeldin of New York, Rep. Barry Loudermilk of Georgia, Rep. Scott Tipton of Colorado, Rep. William Timmons of South Carolina, Rep. Blaine Luetkemeyer of Missouri, Rep. Denver Riggleman of Virginia, and Rep. Warren Davidson of Ohio.