The flashing neon lights and bright signs of payday lenders offering short-term loans at more than 400 percent interest have become a fixture in towns and cities across the Frontier State. But while these predatory lenders are never hard to find, it can be nearly impossible to get out of one of their loans. That’s why the Consumer Financial Protection Bureau built a set of commonsense consumer protections into its “payday loan rule” — a rule some members of Congress aim to repeal under the Congressional Review Act.<\/p>\n
Marketed to low-income consumers as a short-term solution to unexpected expenses like medical bills and vehicle repairs, payday loans rarely meet a borrower’s needs without creating longer-term financial woes. After all, the lenders’ business model depends upon a debt trap.<\/p>\n
A Consumer Bureau study <\/a> found that a whopping 80 percent of payday loan borrowers either rolled their loan over into a new loan or followed their initial loan with a second one within 14 days. That same study found that one in seven new payday loans will lead to a sequence of ten or more loans, trapping borrowers in a cycle of debt lasting several months, and even years.<\/p>\n Through their predatory business model, payday lenders extract more than $5 million<\/a> in interest and fees from Alaska’s consumer-driven economy each year — money that could otherwise circulate throughout our communities and be spent to help make ends meet.<\/p>\n The cruel debt trap of payday loans led the Consumer Bureau to limit the number of back-to-back loans a lender may issue and to require lenders to assess a borrower’s ability-to-repay the loan, as credit card companies must do, if they want to make more than six loans a year. The rule doesn’t end payday lending in Alaska, but it helps stop lenders from luring consumers into taking out loans they can’t possibly afford to pay back without getting stuck in a cycle of debt.<\/p>\n Alaskans need commonsense protections against debt trap loans.<\/p>\n But some in Congress have taken the side of predatory lenders charging 400 percent interest instead of their constituents stuck in unaffordable loans. Lawmakers in the House (H.J. Res.122<\/a>) and Senate (S.J. Res. 56<\/a>) have introduced resolutions to kill the Consumer Bureau’s payday rule under the fast-track Congressional Review Act. For example, U.S. Sen. Lindsey Graham of South Carolina introduced the Senate resolution after payday lenders gave him more than $35,000<\/a> in contributions.<\/p>\n