AG Coakley Urges Congress to Reject Proposed Bill Reducing States’ Oversight of Payday Lenders
Proposal Could Preempt State Laws and Undermine Consumer Safeguards
BOSTON – Attorney General Martha Coakley today joined 40 attorneys general to urge Congress to oppose a bill preempting states’ authority to crackdown on predatory high cost, short-term lending practices.
In the joint letter, the attorneys general warned Congressional leaders about the potential negative effects of the Consumer Credit Access, Innovation and Modernization Act or H.R. 6139.
“This proposal would eliminate crucial protections for consumers in Massachusetts and limit our authority to enforce state laws that govern certain financial services companies,” said AG Coakley. “I urge Congress to reject this bill and let the states continue to protect consumers from abusive and predatory practices by short term lenders.”
Many states have established their own framework of regulations to protect consumers from the risks associated with nonbank credit service providers. The legislation, however, would give these providers – including payday lenders, installment lenders, car title lenders, prepaid card issuers and check cashers – the ability to obtain a federal charter and sidestep these more stringent state laws.
Although the bill prohibits lenders from extending credit to a consumer unless there is a reasonable basis for believing the consumer can repay the loan, it establishes no standards for determining ability to repay. The legislation also exempts loans with terms of one year or less from the disclosure requirements of the Truth in Lending Act and substitutes a cost metric. By preempting state laws, the proposed legislation would impede state efforts to immediately and directly protect consumers from harm.
This bill was assigned to a congressional committee which will consider the legislation and determine whether to send it to the full House or Senate.
Also signing onto the letter were attorneys general from Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Georgia, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Vermont, Washington, West Virginia, Wisconsin and Wyoming.