Zoeller, attorneys general urge Congress to reject bill reducing oversight of payday lenders

Zoeller, attorneys general urge Congress to reject bill reducing oversight of payday lenders

Proposal could preempt state laws & undermine consumer safeguards

INDIANAPOLIS – Attorney General Greg Zoeller today joined 40 state attorneys general to urge Congress to oppose a bill preempting states’ authority to crackdown on predatory high cost, short-term lending practices.

In a joint letter, initiated by Zoeller and Illinois Attorney General Lisa Madigan, state officials warned House Speaker John Boehner, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell about the negative effects of the Consumer Credit Access, Innovation and Modernization Act or H.R. 6139.

“It’s critical for states to both preserve consumers’ access to alternative forms of credit and retain the ability to take quick action against short-term lenders that prey on those already in financial distress,” Zoeller said. “This joint effort among attorneys general underscores the importance of killing this federal legislation that would provide no significant protections for consumers and have unintended consequences.”

Many states have established their own framework of regulations to protect consumers from the risks associated with nonbank credit service providers. However, this legislation would allow providers – including payday lenders, installment lenders, car title lenders, prepaid card issuers and check cashers – the ability to obtain a federal charter and sidestep these more stringent state laws.

The bill would allow lenders to extend credit to consumers if there is a reasonable basis for believing the consumers can repay the loans, but without putting specific standards in place. The legislation also exempts loans with terms of one year or less from the disclosure requirements of the Truth in Lending Act and substitutes a cost metric. By preempting state laws, the proposed legislation would impede state efforts to immediately and directly protect consumers from harm.

This bill was assigned to a congressional committee which will consider the legislation and determine whether to send it to the full House or Senate.

Also signing onto the letter were attorneys general from Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Georgia, Guam, Hawaii, Idaho, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Vermont, Washington, West Virginia, Wisconsin and Wyoming.