Payday lenders preying on Americans during pandemic, must be stopped

  • Payday lenders have exploited vulnerable Americans during the pandemic and benefited from the Paycheck Protection Program.
  • The payday loan industry has a habit of buying off politicians to evade regulation.
  • It is time to eliminate the corrupt influence of the predatory lending industry on our political system.
  • Jonathan Schleifer is the executive director of The Fairness Project, a nonpartisan, nonprofit organization focused on ballot initiative campaigns.
  • This is an opinion column. The thoughts expressed are those of the author.
  • Visit Business Insider’s homepage for more stories.

Since the pandemic hit, the US government has unfortunately failed to provide the public with the resources they need to survive this health and economic crisis. Across the country, people are facing unemployment benefit cuts, mass evictions and loss of medical coverage, but lawmakers continue to deal with corrupt industries like predatory payday lenders.

Congress is currently deliberating on a fifth COVID-19 funding package. While predatory lenders have received interest-free loans in past bailouts, this time lawmakers must ensure that not a penny of government aid falls into the hands of the payday loan industry.

This pandemic has exposed what is not working in our economy and our political system, and a big problem is payday lenders who make their profit by preying on those who are most vulnerable when they have the time. Not needed anymore. Despite being hugely unpopular, the industry backed by Wall Street continues to thrive due to its ability to wield incredible power over lawmakers.

It’s time for our government to stop supporting predatory lenders preying on the most vulnerable and focus on ensuring everyone has the financial resources they need to survive this crisis.

Predatory short-term lenders disproportionately target low-income workers, people of color and women. The lack of banks in majority black and minority neighborhoods, combined with discriminatory credit practices, makes it difficult for people of color to take out traditional loans or open credit accounts. Payday lenders have grasped this disparity and are three times more likely to operate in black neighborhoods than in white neighborhoods.

These lenders advertise their loans as a short-term credit option to be repaid in a few weeks, however, the typical borrower is in debt for five months. The business model of payday lenders is to lure people into short-term loans that they cannot repay with average interest rates as high as 661%.

Our current economic crisis is ripe for the predatory lending industry to invade and prey on vulnerable people who have no other option to access money, and lawmakers are doing little to stop them. . As the pandemic and resulting economic crash have left millions in desperate need of financial support to pay their bills, healthcare and rent, payday lenders are using their political clout to increase their profits.

Lawmakers do little to stop predatory lenders

The Obama administration required these lenders to ensure that their customers had a proven ability to repay their loans, thereby saving consumers from significant debt and protecting them from predatory lenders. But these restrictions cost the payday loan industry $7 billion a year, and they have fought to eliminate them since Obama took office.

Recently, the Consumer Financial Protection Bureau revised this crucial rule, allowing predatory lenders to profit as they wish. Now that those restrictions have been removed amid an economic crisis, the agency that exists to protect consumers is making it easier for predatory lenders to trap families in an endless cycle of debt.

The payday loan industry has a habit of buying off politicians to evade regulation. They are backed by hedge funds and private equity firms that make huge profits from loans that intentionally drive people into endless debt. As a result, payday lenders and other predatory lenders have colossal financial resources to forge powerful political alliances inside Capitol Hill and block anything that threatens industry profits.

Data from Open Secrets shows lawmakers on both sides of the aisle have been bought off by the industry. Corruption goes all the way to the top of the Trump administration.

Since the start of the pandemic, lawmakers have protected the payday loan industry

In April, a group of House Republicans and Democrats called on the Treasury Department and the Small Business Administration to open Paycheck Protection Program loan applications to predatory payday lenders. According to recently released data from the Treasury Department, payday lenders brought in millions of dollars from the PPP program.

It means taxpayer-funded government aid has been taken from small businesses and non-profits that desperately need it and given to an exploitative industry that provides loans they know people can’t repay. . It’s no surprise that lawmakers who backed the distribution of PPP loans to predatory lenders are among the biggest recipients of the payday loan industry’s lobbying money.

Lawmakers should seek every means to protect the most vulnerable, without freeing up an exploitative industry to prey on those in desperate need of financial support during a crisis. With another stimulus bill being negotiated in Congress, it is imperative that lawmakers include provisions that prevent the payday loan industry from profiting even more.

Payday lenders will continue to exert their influence on lawmakers and prey on people unless we continue to expose their shady practices and the cowardly politicians who continue to serve their interests.

Although politicians can be bought off and will turn a blind eye, voters know better. In November, Nebraskans have the opportunity to approve a payday lender interest rate cap initiative, just like Colorado did in 2018. Voters have the power to limit the power of payday lenders, and other states should follow the example of Nebraska and Colorado.

It is time to eliminate the corrupt influence of Wall Street and the predatory loan industry from our political system. We cannot let these corrupt and predatory practices continue to fly under the radar.