Mainers bid good riddance to payday lender
When Lynnea Hawkins of Auburn fell behind on her electricity bill, she was forced to take out a payday loan to prevent her power from being disconnected.
“I couldn’t let that happen and didn’t have really any other choice but to take out a $90 loan from a payday lender,” said Hawkins. “I had to give them access to my checking account and ended up paying back close to $140. I’m fortunate that I was able to pay that back. I have many friends and neighbors who have to take out a loan every week to pay for rent and other necessities.”
Every year, millions of Americans like Hawkins turn to pay day lenders in the hopes of finding short-term financial relief and find themselves paying exorbitant interest and mired in a cycle of debt.
On Thursday, as part of a nation-wide day of action calling for strong rules against predatory lenders, members of the Maine People’s Alliance gathered in front of a soon-to-be-closed payday lender in downtown Portland to call on the Consumer Financial Protection Bureau (CFPB) to protect millions of Americans from these predatory lending practices.
Last month, payday lender Ace Cash Express announced that it would close its two stores and leave Maine. The announcement came after the company reached a $10 million settlement with the CFPB over accusations that it harassed borrowers. A federal class-action lawsuit against the company is pending in Delaware.
Payday lenders offering short-term, high-interest loans marketed as a quick financial fix. They often charge an annual percentage rate (APR) of 300% or higher for a typical payday loan and make loans with no regard to actual ability to afford their terms, instead relying on direct access to an individuals’ bank account for repayment. Each year, payday lenders rake in more than $10 billion in fees by trapping an estimated 12 million Americans in a cycle of debt.
“It’s a complete and total racket,” said Hawkins. “It should have been regulated a long time ago.”
Soon Hawkins might get her wish. In March the CFBP released an outline of a proposed rule on small-dollar lending and is expected to release a full proposal this fall.
“We aren’t sad to see this predatory lender close up shop,” said Andrew Francis, Deputy Communications Director for the Maine People’s Alliance. “Our communities are better off when folks can keep their money in Maine, with responsible, local lenders, instead of getting trapped in a cycle of indebtedness to Wall Street.”
Maine is one of 24 states that have imposed regulation on payday lenders, capping the interest rate on short-term loans. Last week a bill sponsored by Rep. Janice Cooper (D-Yarmouth), “LD 1092: An Act To Prevent Abusive Debt Collection Practices,” became law after the legislature overrode a veto from Governor LePage. The bill requires written debt settlement agreements and prohibits debt collectors from abusing the court system to collect on illegitimate debts.
Payday lenders have sought to add provisions to the federal rulemaking process that would preempt and undermine existing state regulation like Maine’s.
“It’s time for the CFPB to pass strong, broad rules that protect all Americans from unscrupulous predatory lenders,” said Francis. “The last thing we need is for the payday industry to weaken these proposed rules and preempt Maine’s work on this issue. Ace Cash Express is closing its two stores and leaving Maine. We don’t want them coming back in a year and opening up ten more.”
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