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"Shark Week" Highlights Dangers of Payday-Loan Predators

Some people believe payday loan sharks should be feared just as much as those swimming in the ocean. (Valdek/Pixabay)
Some people believe payday loan sharks should be feared just as much as those swimming in the ocean. (Valdek/Pixabay)
June 30, 2016

LANSING, Mich. – While some Michiganders enjoy watching "Shark Week" specials on TV, others are working to stop what they see as another type of predator – the loan shark.

The Consumer Financial Protection Bureau recently announced rules to regulate the payday loan industry, but some groups contend those rules won't go far enough to protect people from predatory practices.

A 90-day comment period on the proposed rules is underway, and Deborah Adams, financial reform advocate for the advocacy group Michigan United, wants people to voice their concerns.

"What we need to do is to make sure that this sends a strong message to Congress and our politicians that this needs to stop," she stresses.

The rules call for lenders to verify a customer's ability to repay a loan, but Adams says there are too many exceptions.

Her group and others contend the rules should require income and expense underwriting practices with every loan, and an end to loan rollovers that leave consumers strapped with debt.

Supporters of payday lending say it's sometimes the only option for people with limited income or poor credit to get cash quickly for a financial emergency.

Adams says last year, payday lenders in Michigan collected more than $103 million in fees, primarily from low-income households and communities of color.

"People who have very limited income cannot pay back their loans as fast and so, that's what they count on,” she points out. “That's where they get the fees and the interest rate that is in excess, many times, of 400 percent."

Adams also maintains the rules should be adjusted to cover all loans that allow lenders to use what she calls invasive practices to extract payment, such as garnishing wages, holding unlimited title to a vehicle, or accessing the borrower's bank account.

"It keeps some people in debt for years, and there's no regard to the challenges that these families are facing as a result of having this money taken directly out of their bank account," she explains.

The payday-lending industry contends the proposed rules would result in massive revenue declines, shutting down some smaller lenders.

Mary Kuhlman, Public News Service - MI