The payday lending industry faced strong headwinds in 2013, including:
- The CFPB’s April 2013 report that clearly outlined how payday loans are putting the majority of people into a worse situation financially.
- A Senate Select Committee hearing in July, where lobbyists for banks who make deposit advance loans (their version of payday loans) and for payday lenders scrambled to justify their usurious interest rates.
- New guidance from the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation which will require banks to actually underwrite the high-interest deposit advance loans they provide to their customers. As American Banker noted earlier this week, two banks regulated by the Federal Reserve can continue making these harmful loans because the Fed didn’t sign onto this guidance.
- The CFPB announced a $5 million fine for Cash America for making illegal loans to servicemembers and their families, robo-signing debt collection paperwork, and for shredding documents prior to the CFPB’s visit. Consumers are eligible for another $15 million in refunds.
What could happen to this industry in 2014?
A few guesses:
- With Janet Yellen at the head of the Federal Reserve, could Regions Bank and Fifth Third also be forced to underwrite their loans?
- In California, the Sacramento Bee has called on the legislature to consider reforming California’s payday lending laws.
- If Cash America was so worried about their practices that they shredded documents, it’s likely that other payday lenders will also be examined, and if they’re breaking the law, the CFPB will likely fine them as well.
If you’re interested in seeing the 47 most important developments related to low-income communities and communities of color in California in 2013, check out our New 2013 Interactive Timeline.