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Payday Loan Protections for Consumers Crumble Under Trump

Payday lending drains tens of millions of dollars from low-income families every year. (Steve Rhodes/Flickr)
Payday lending drains tens of millions of dollars from low-income families every year. (Steve Rhodes/Flickr)
February 27, 2018

ALBUQUERQUE, N.M. – Three Senate Democrats want to know why the acting director of the Consumer Financial Protection Bureau plans to weaken protections that guard against payday lender wrongdoing.

Sens. Elizabeth Warren, D-Mass., Jeff Merkley, D-Ore., and Richard Blumenthal, D-Conn., have sent a letter to Mick Mulvaney asking why he has proposed to delay rules to rein in payday loans and drop lawsuits against payday lenders.

Ezekiel Gorrocino with the Center for Responsible Lending, says often, people getting payday loans become trapped in a vicious circle of debt.

"About 70 to 75 percent of the profits they make is not on the person who goes and takes one loan and pays it back," he explains. "They make those profits on the person who goes and takes a loan, can't pay it back, has to take another loan to pay the first loan, can't pay it back."

The mission of the Consumer Financial Protection Bureau when it was created in 2010 was to protect Americans from lenders and debt collectors who prey on people with financial difficulties.

Mulvaney refused to answer any specific questions listed in the letter from Warren and other lawmakers about why the Trump administration is not enforcing Obama-era regulations.

Payday loans usually come with a very high-interest rate, and Gorrocino says they often need to be paid back in full when a borrower receives their next paycheck. He recommends when people find themselves in a money squeeze that they first approach community banks, credit unions, a church or other nonprofit, so they don't get dragged deeper into debt and lose their bank account or end up with bad credit.

"If, for example, you need to pay a utility bill or a medical bill, what we tell people is that you should try to negotiate, show that you are willing to pay and come up with a payment plan," he says. "Even if it takes a long time to pay it back, just as long as you are reducing this debt, it actually shows that you are actually willing to work with them."

It's estimated that payday lending drains tens of millions of dollars from low-income families every year. Gorrocino says some states maintain a database that shows complaints against payday lenders who have proven untrustworthy.

Roz Brown, Public News Service - NM