Payday loan company ALEC gets reprieve under Trump administration

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Member companies of the American Legislative Exchange Council (ALEC) are profiting from the Trump administration’s deregulation spree. ALEC is, of course, the corporate money mill that provides a library of “model laws” written or endorsed by lobbyists to right-wing state legislators across the country.

Advance America is the largest payday lender in the United States, with 2,500 locations. The company didn’t return our call about its latest activities, but in 2014 Advance America was listed as a “fiduciary-level” financial sponsor of ALEC.

The Trump administration’s treatment of Advance America and the predatory payday loan industry shows how Trump “deconstruction of the administrative state” teams often pit low-income people and the working poor against giant corporations, companies that enjoy the protection of politicians who take their money.

The CFPB takes on the payday loan industry

The Center for Media and Democracy crunched the numbers and Advance America has received more than $40 million in class action payouts, fines and damages from cases brought by state attorneys general since 2009. The company was found to be misleading consumers by overcharging and inflating hidden fees. In some cases, when people allow withdrawals from bank accounts to repay the loan, the banks also charge a fee.

This type of predatory lending has prompted the Consumer Financial Protection Bureau (CFPB), the federal consumer protection agency championed by US Senator Elizabeth Warren and President Obama, to crack down on the industry.

Among other things, the CFPB issued a rule in 2017, which would have required the convenience industry to “reasonably determine that the consumer has the capacity to repay the loan”, and would have prevented lenders from attempting to collect payment on people’s bank accounts. ways that rack up excessive charges. The rule also would have required payday loan companies to notify consumers before attempting to withdraw payments from their account.

But when President Trump put Mick Mulvaney in charge of the CFPB, he literally put the fox in charge of the chicken coop.

Mulvaney wreaks havoc at CFPB

Many consumer groups, including Americans for Financial Reform and US PIRG, consider Trump’s nomination of Mulvaney to be illegal. Mulvaney already had a position as director of the Office of Management and Budget. The CFBP already had an acting director as required by law, the long-serving deputy director of the CFPB, Leandra English. Now the problem is in class and a federal judge is expected to rule soon. But Mulvaney didn’t sit around waiting for the courts to rule, he got to work.

Advance America, owned by Mexican conglomerate Grupo Salinas, has its US headquarters in Spartanburg, South Carolina. The former House district of Mulvaney includes parts of Spartanburg.

As a Republican member of the United States House from South Carolina, Mulvaney took more than $62,000 from payday lenders. This week, he gave a speech to the American Bankers Association and told them how his office works.

“We had a hierarchy in my office in Congress,” said Mulvaney. “If you are a lobbyist who has never given us money, I have not spoken to you. If you are a lobbyist who has given us money, I could speak to you.”

Well, Mulvaney seems to have carried that policy all the way to the nation’s top consumer protection agency. In December 2017, Mulvaney abdicated his responsibility to protect consumers by deciding to postpone the new payday lenders rule indefinitely.

By putting the rule on ice, Mulvaney is helping Advance America and other payday lenders by allowing them to continue lending money short-term without proper credit checks on borrowers.

Then he dropped the CFPB lawsuit against four predatory lenders who were illegally granting loans with interest rates of a staggering 950% APR in at least 17 states. Mulvaney even wants to deepen the critically important public database where consumers can register complaints against abusive financial firms, NPR reports this week.

There is a need for short-term loans in times of economic distress for consumers and especially for those who are unbanked – who do not have access to affordable community banks or credit unions in their neighborhood – but the industry has a long history of charging excessive fees and interest rates, up to 500% per year in some states, then suing borrowers and garnishing wages for reimbursement.

Payday loans “trap borrowers in a cycle of unaffordable debt, causing serious financial harm such as bank penalties, unpaid other bills, or even bankruptcy.” Mulvaney’s action ‘shows disregard for consumer protection and low-income communities who are targeted by these debt trap loans,’ the public interest group says Stop the debt trap.

The history of lawsuits from state attorneys general and class action lawsuits against Advance America, summarized below, and the fact that nearly all payday lenders do business in multiple states clearly show the need for federal legislation. , and not just state surveillance, which could be uneven. in some states.

2018: Advance America forced to pay the state of California $160,000 and reimburse customers $88,000 for charging interest rates above the law and using lead generators to find borrowers, a practice prohibited by California law.

2015 : Advance America agrees to repay $8 million in loan fees and interest to Pennsylvania customers and write off $12 million in loans, for exceeding state interest rate limits by charging excessive fees to circumvent the state’s interest rate cap. “We contend that this company disguised its outrageous interest rates as fees, misleading consumers and breaking the law,” said former state attorney general Kathleen Kane. “Payday lending practices negatively impact vulnerable consumers and often force them into a cycle of debt that many cannot recover from.”

2010: Advance America settles a class action lawsuit in North Carolina by paying $18.75 million to 140,000 customers in restitution. In the class, the largest of its kind against a payday lender and the state Attorney General accused Advance America from charging excessive fees and fines.

2009: Advance America agrees to pay a minimum of $2 million to Georgian borrowers to settle all class action claims in the state. The average borrower would receive up to $90 to settle a lawsuit that alleged the company violated state law by charging excessive fees to circumvent interest rate caps.


Mary Bottari contributed to this report.

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