News Release: NY/NJ Banking Committee Chairs, Groups, Decry Trump Proposal to Unleash Payday Lending

FOR IMMEDIATE RELEASE:
September 3, 2020

CONTACT:
Andy Morrison, New Economy Project, andy@neweconomynyc.org
Jerome Montes, New Jersey Citizen Action, jerome@njcitizenaction.org

NY & NJ Lawmakers, Groups, Blast Dangerous Trump Proposal to Unleash Predatory Payday Lending & Siphon $1 Billion Annually from Communities Hardest Hit by COVID-19

Legislators from both states delivered letters opposing
proposed federal rule

Today, chairs of New York and New Jersey’s Senate and Assembly banking committees and community leaders blasted the Trump administration’s proposal to allow predatory lenders to circumvent state usury laws and contravene the authority of state elected officials.

Speakers detailed how the Trump administration’s top banking regulator, the Office of the Comptroller of the Currency (OCC), seeks to effectively legalize predatory lending in New York and New Jersey, by enabling online payday and other high-cost lenders to make debt-trap loans banned in these states. The OCC proposal would enable these lenders to extract more than $1 billion in fees, annually, from low-income communities and communities of color in these two states.

Dozens of New York and New Jersey lawmakers also delivered today comment letters opposing the proposed rule and calling on the Trump administration to withdraw it immediately. Click to view copies of the New York and New Jersey letters.

“As a person who has fallen prey to predatory lending practices that destroyed my life, I know that these proposed rule changes by the Trump administration are a significant danger to the people of my community who are supposed to be protected from abuse,” said RueZalia Watkins, a Resident Council leader with Banana Kelly Community Improvement Association and a South Bronx resident. “Under the proposed Trump rule change, these unscrupulous financial entities would be in a position to destroy many of our families and businesses through predatory loans that they cannot repay. We need regulations that will allow our states to protect us from these abusive practices.”

“COVID-19 has led to great economic hardship for many people, especially low-income and black and brown communities, as well Minority and Women-Owned Business Enterprises (MWBE),” said NYS Senator James Sanders, Jr., chair of the NYS Senate Committee on Banks. “We need to stop efforts by the Trump Administration to allow predatory lending among the most vulnerable New Yorkers.”

“We must stop the Trump administration’s brazen attempt to override long-time state consumer protections to allow predatory lenders to ensnare New Yorkers,” said NYS Assemblymember Thomas J. Abinanti, chair of the NYS Assembly Committee on Banks. “With the feds ending the $600 supplemental unemployment checks and tightening eligibility for safety net programs, everyday people and small businesses are desperate for money to survive the COVID-19 economic crisis, making them prime targets for these deceptively marketed, exploitive loans.”

“This action is cruel and foolish and it will unleash predatory practices on the most vulnerable,” said NJ Senator Nellie Pou, chair of the NJ Senate Commerce Committee and the Legislative Latino Caucus. “The proposed rule is nothing less than an attempt to preempt protections we have on the books and evade state laws designed to protect people. It’s a shell game that would allow predatory lenders to bypass longstanding New Jersey protections and prey on our most vulnerable residents. There is the added insult of racial injustice because the predatory practices of abusive payday lending often targets people of color, especially African Americans and Latinos.”

“Predatory lenders, under this proposed rule, would be given carte blanche to evade state law and take advantage of working-class and poor residents in New York and New Jersey,” said NJ Assemblymember John F. McKeon, chair of the NJ Assembly Financial Institutions and Insurance Committee. “400 percent interest rates will turn a two-week $200 loan into a 5-month loan paying $800 in interest under this ruling. That’s a catastrophe in the making for working families and for our most vulnerable communities trying to survive in a pandemic which has cost them jobs and placed a severe strain on their finances. The damage this will have on New Jersey households and our efforts to rebuild the state economy is unconscionable.”

“This proposal has all the ingredients we’ve come to expect from the Trump administration: dismantling of critical protections to enrich a predatory industry; exploitation of people and communities struggling to get by; flagrant conflicts of interest; sweeping action by a Trump-appointed acting regulator, unconfirmed by the Senate–and an assault on Black and brown people and communities,” said Sarah Ludwig, Founder and Co-Director, New Economy Project. “It poses a direct and serious threat to New Yorkers, and we will fight to keep this pernicious lending out of our state.”

“Predatory lenders should not be enabled to prey on consumers by evading state laws. The Trump administration’s actions would bypass longstanding protections in New Jersey and New York that were put in place to shield our most vulnerable residents from getting trapped by these lenders,” said Phyllis Salowe-Kaye, Executive Director, New Jersey Citizen Action. “With so many struggling during the COVID-19 pandemic these protections are more important than ever. We urge all our elected leaders to raise their voices in opposition to this proposed rule.”

“With interest rates averaging 400% and higher, payday lending is a ruinous form of usury, nothing more than legal loan sharking. The Trump administration’s proposed rule would allow payday lenders to prey on those hardest hit by the COVID-19 pandemic; our small business owners, our communities of color and our working families,” said Beverly Brown Ruggia, Financial Justice Organizer, New Jersey Citizen Action. “The rule would set back the ongoing struggle for racial and socio-economic equity and while also greatly hampering the efforts of states like ours to recover from the pandemic. The $1 billion in savings that would be lost to New Jerseyans and New Yorkers should be paying for food, rent, housing, medicine, utilities and other essentials, not lining the pockets of payday lenders.”

At the news conference, speakers described how the proposed rule would usher in sham “rent-a-bank” schemes, allowing unregulated online lenders to “partner” with national banks so they can circumvent state usury laws and charge struggling people triple-digit interest rates on loans. Speakers explained that New York and New Jersey are among 16 states, plus D.C., that effectively ban these kinds of predatory payday lending schemes from taking advantage of their residents, ensuring they have safe, affordable credit alternatives. They pointed to research that shows people in New York and New Jersey collectively save more than $1 billion annually in fees that high-cost payday and car title lenders would otherwise siphon.

The speakers also blasted the Trump administration for the deeply flawed process in proposing the rule, giving the public only 30 days to submit comments, during the throes of the pandemic, in the month of August. What’s more, the speakers noted that Trump’s acting Comptroller of the Currency, Brian A. Brooks, who issued the proposal, comes straight from the “fintech” industry that would benefit from the proposed rule. The speakers noted that the same regulatory agency effectively put a stop to these “rent-a-bank” schemes years ago, saying they presented too many risks. They expressed their strong opposition to this reckless turnabout, which they described as a blatant attempt to subvert New York’s and New Jersey’s strong state consumer protections and do the bidding of predatory online, “fintech,” and other lenders.

A recording of the event is available on request. Please email mike@neweconomynyc.org for a link. Slides from the briefing are available here, and a fact sheet on the Trump administration’s proposal is available here.