House Financial Services Chairwoman Maxine Waters (D-Calif.) is firing back at lawmakers who have called for allowing installment and payday lenders to be eligible for Paycheck Protection Loans, contending that such companies engage in predatory lending practices.
“Many consumers who take out payday loans get caught in a debt trap when they roll those loans over when they come due and take out up to ten such loans a year,” Waters said, in a letter to Treasury Department and Small Business Administration officials.
A bipartisan group of House members has said that such lenders should be eligible for PPP loans as long as they do not make PPP loans themselves.
“Many of these companies have fewer than 500 employees; these predominantly consumer financing providers are not currently (and have no plans to become) PPP lenders themselves,” the House members, including Rep. Blaine Luetkemeyer (R-Mo.), ranking Republican on the House Consumer Protection and Financial Institutions Subcommittee, wrote in a letter to Treasury and SBA officials.
They said some consumers do not have access to traditional financial institutions and rely on non-traditional lenders to gain access to credit, making them vital businesses to keep open during the pandemic.
But Waters said that the lenders often force consumers into worse circumstances, adding that payday lenders charge an annual percentage rate of 391% on average.
The battle comes amid speculation that the CFPB will issue updated rules governing payday lenders any day. The Obama Administration issued strict rules governing such lending, but the Trump Administration has made it clear that it believes those rules are far too strict.