Even with state protections, Mainers are vulnerable to online predatory lenders
A new consumer guide released by the Maine Bureau of Consumer Credit Protection shows that even with Maine’s current regulations on predatory lending, many people remain vulnerable to the predatory practices of payday lenders. In many cases Mainers are being recruited for high-interest loans online, where these lenders can operate even though they may not be legal within the state, taking users’ credit information and trapping them in a cycle of debt.
“Somebody will say, ‘I was on the internet at 2 in the morning, I filled out all these forms, I gave them my bank account numbers, the routing and transit and the account number, I asked for $500 and I got $500; I’ve been making payments for four or five months. I paid them over $1,500; I asked what my balance was, and they say it’s only gone down by $20,” explained David Leach of the Bureau of Consumer Credit Protection to MPBN.
Last year, predatory lenders across America made over $10 billion by entangling millions of people into short-term, high interest payday loans. These lenders market payday loans as a quick financial fix for people working minimum wage jobs who have nowhere else to turn for help. But with interest rates as high as 600% in some states, many borrowers have trouble repaying the loans, often taking out multiple loans and becoming trapped in a cycle of debt, owing more of each week’s paycheck to Wall Street lenders.
Consumer advocates have long called for action to help the millions of Americans caught in this cycle of debt and this year, in June, the Consumer Financial Protection Bureau (CFPB) unveiled a long-awaited proposal to rein in the worst practices of the payday lending industry. With this proposed rule, the CFPB aims to curb some of the worst practices of the industry practices and have the same rules apply to payday lenders as any bank or credit union, such as being required to check a borrower’s ability to pay or determining whether the borrower has outstanding loans with other lenders.
Maine is one of the 24 states that have already imposed similar regulations on payday lenders, including capping the fees that lenders can take on short-term loans, requiring them to be licensed through the Bureau of Consumer Credit Protection and post a $50,000 consumer protection bond with the state. A 2007 report by the Center for Responsible Lending estimated that Maine’s payday lending rules have kept over $25 million dollars annually in Maine communities rather than the pockets of Wall Street firms. However, without new rules from the CFPB, many Mainers remain vulnerable especially from online payday lenders operating on the edges of current Maine law.
The CFPB rule is in the process of a public comment period, allowing supporters to weigh in and ask for the broadest, strongest possible rules to prevent payday lenders from taking advantage of loopholes to continue deceptive practices. The public is encouraged to offer comments here.
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