Civil and Human Rights Leader Testifies in Favor of Payday Lending Regulations for the Consumer Financial Protection Bureau
WASHINGTON – Today, Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights, will testify in favor of draft regulations designed to rein in some of the most abusive and predatory practices of the payday lending industry at a Consumer Financial Protection Bureau Field Hearing in Kansas City, Mo. The hearing is scheduled to begin at 11 a.m. EDT.
His remarks will endorse the new regulations as “a very strong step in the right direction.”
According to his prepared remarks, Henderson will testify that “It is a matter of common sense that lenders should ensure that borrowers not simply have enough money to repay their loans – but to ensure that borrowers can repay loans, on time, without being left in an even worse financial position. In the same way that we require drug companies to show that their cures for disease are safe, we have a moral imperative to make sure that the cures being sold for financial ailments aren’t worse than the disease itself.”
His full testimony, as prepared for delivery, is below.
- Click here for a headshot of Wade Henderson.
- Click here for more information about the field hearing.
“Good morning. I’m Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights, a coalition of more than 200 national civil and human rights organizations, dedicated to building an America as good as its ideals.
I’d like to thank you, Director Cordray, and your colleagues at the Consumer Financial Protection Bureau, for organizing today’s hearing, and for your efforts to tackle one of the most important economic justice issues facing communities of color today.
The Leadership Conference on Civil and Human Rights believes that the ability to obtain financial services on a fair, equal, sustainable basis is an essential civil and human right of all Americans.
Unfortunately, communities of color and other vulnerable groups have long been subjected to abusive financial practices that have undermined their economic security. They have gone from experiencing redlining and other forms of overt discrimination to, in more recent years, being aggressively steered into predatory and deceptive mortgage and consumer loans, with the end results speaking for themselves over the course of the past decade.
We are relieved by the numerous improvements to federal and state financial regulations in the wake of the financial crisis, as well as by the overall change in philosophy that gave rise to the CFPB. And a number of financial services providers do appear to have learned the lessons of the financial crisis. Yet communities of color are still being targeted by predatory lending practices. And this has been especially true in the market for small-dollar lending.
Payday loans, and many other products like auto title loans, are marketed as an easy solution for financial emergencies. But they too often fail to work as advertised. Payday lenders argue that they verify that borrowers can repay their loans – but what they don’t do is verify that borrowers can repay their loans while also meeting their other living expenses. This means borrowers are often left with no choice but to renew their loans at the same high cost, and getting trapped and slowly drained of what limited assets they have. Indeed, the very nature of the payday lending business depends on renewals of existing loans.
What is just as troubling is the aggressive marketing of these loans to communities of color and other economically vulnerable populations – including older Americans who rely on Social Security. Studies show that payday lenders are heavily concentrated in African-American and Latino-American communities, where access to mainstream banks is limited – and I realize my time now is limited, but perhaps during the discussion we can touch on postal banking and on modernizing the Community Reinvestment Act as ways to improve access to better financial services.
While The Leadership Conference has called for a 36 percent interest rate cap on loans – as a number of states have done and as Congress rightly did with respect to military service members – we realize that this is beyond the CFPB’s authority.
But what the CFPB is proposing today is a very strong step in the right direction. It is a matter of common sense that lenders should ensure that borrowers not simply have enough money to repay their loans – but to ensure that borrowers can repay loans, on time, without being left in an even worse financial position. In the same way that we require drug companies to show that their cures for disease are safe, we have a moral imperative to make sure that the cures being sold for financial ailments aren’t worse than the disease itself.
Thanks in part to Dodd-Frank, mortgage lenders now utilize commonsense Ability-to-Repay rules – and today we applaud the CFPB for applying them to small-dollar lending practices as well. And we look forward to supporting you in your efforts to protect all Americans, including communities of color, from the scourge of predatory loans. Thank you.”
Wade Henderson is president and CEO of The Leadership Conference on Civil and Human Rights, a coalition charged by its diverse membership of more than 200 national organizations to promote and protect the rights of all persons in the United States. The Leadership Conference works toward an America as good as its ideals. For more information on The Leadership Conference and its 200-plus member organizations, visit www.civilrights.org.