North Carolina is a leader in providing common-sense consumer protections in the financial marketplace. We are one of 15 states, plus the District of Columbia, to prohibit payday lending, and every attempt in the past 16 years to bring payday lending back has failed due to bipartisan opposition.
But an attempt in Congress to kill landmark payday lending reform threatens not only veterans and others in the 35 states that have payday lending, but also the people of North Carolina and other payday-free states. So it is surprising that six members of the N.C. congressional delegation have sponsored a resolution to repeal the Consumer Financial Protection Bureau rule requiring that payday and car title lenders make sure their customers can afford their loans. House members sponsoring this bill to help payday lenders, who are illegal in our state, include N.C. Reps. Ted Budd, Richard Hudson, Patrick McHenry, Robert Pittenger, David Rouzer and Mark Walker.
They should rethink this position and support strong consumer protections against predatory payday lending.
The payday lending business model is simple — offer 400 percent interest rate loans to borrowers who can’t afford them. Unable to afford both the loan and the high interest and continue to meet essential expenses, customers are forced to borrow again and again, taking out another unaffordable payday loan to repay the previous one. Stuck in this debt trap, a borrower can end up paying thousands of dollars in fees on a $300 loan.
North Carolina is home to more than 724,000 veterans — almost 9 percent of the adult population — and this type of financial abuse hits them especially hard. It’s not uncommon for former service members to need financial help during tough times. More than a million veterans nationwide are at risk of becoming homeless due to poverty or lack of support from their communities. Turning to 400 percent interest payday or car title loans can look like quick fixes for these veterans, when in reality they are debt traps that make it hard to keep up with bills and living expenses, and lead to repeat bank fees, closed accounts and even bankruptcy.
The Department of Defense protects active-duty service members and their families from predatory loans. But these DoD rules do not protect veterans who often face financial difficulties after separating from the military. Taking on high-cost debt makes the transition to civilian life even harder.
The CFPB’s payday and car title lending rule will keep military and veterans' families from falling into financial ruin by requiring that lenders verify that the borrower can afford to repay before lending money.
N.C. veterans are fortunate that payday loans are illegal here. But we at the N.C. Veterans Council believe that repealing the payday lending rule will only embolden predatory lenders to return to our state and offer their toxic loan products. We can’t afford to let that happen.
Our members of Congress should not defend payday lenders and instead should stand with veterans by rejecting all efforts to roll back the CFPB’s payday lending rule. It’s time for payday lenders to stop profiting off the misfortunes of veterans.