Today’s The Washington Post features an Op-Ed by New Economy Project’s co-director Deyanira Del Rio and campaigns coordinator Andy Morrison: “Here’s What Happens When Payday Loans are Banned.”
New York is one of 14 states that, along with D.C., maintain strong usury (interest rate) caps that effectively ban payday lending. It’s a swath of the country we have dubbed PaydayFreeLandia, representing 90 million Americans, or about one-third of the U.S. population.
Del Rio and Morrison write:
The benefits of residing in PaydayFreeLandia are vast….New Yorkers preserve nearly $790 million each year that payday lenders and their ilk would otherwise siphon in fees. Across all payday-loan-free states, annual savings exceed $3.5 billion — an estimate that does not even include bank overdraft fees triggered by payday loans or funds drained by abusive debt collection and other economic fallout from payday loans.
We reject the dangerous myth that payday lending must be preserved and simply made less predatory. The notion that people somehow need usurious, short-term loans dominates too much of the payday lending debate and is flatly contradicted by former payday loan borrowers themselves, who report being better off after their states eliminated these debt traps.
New Economy Project and allies have fought for years to keep payday lenders out of New York. Most recently, we mobilized community, labor, consumer and civil rights groups to defeat a dangerous bill in Albany that would have opened the door to high-cost, exploitative lending in our state.
As the federal Consumer Financial Protection Bureau prepares to issue new payday lending regulations, the stakes are high — not only in states where payday lending is currently unchecked, but also for the 90 million people who live in PaydayFreeLandia:
A weak CFPB rule would embolden industry actors that seek to break into payday-loan-free states. Indeed, lobbyists in Pennsylvania have already seized on loopholes in the proposed payday lending rule to claim, disingenuously, that the CFPB has given its stamp of approval to payday-like loans.
Del Rio and Morrison note that most of the country was payday loan-free until the 1990s, when financial deregulation and the gutting of many states’ usury laws enabled payday loans — with interest rates of 400% and up — to proliferate. They call on the CFPB to heed the lessons of PaydayFreeLandia and end abusive payday lending, once and for all.
Read the full Op-Ed here.