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Financial Fraud Law

Should Congress Block State Regulation of Payday Lenders?

 In a joint letter to Congress, 41 state attorneys general are urging Congress to reject H.R. 6139, the Consumer Credit Access, Innovation and Modernization Act, contending that the bill would “eliminate crucial protections for consumers” and limit the authority of states “to enforce state laws that govern certain financial services companies.”
 
Many states have established their own framework of regulations to protect consumers from the risks associated with nonbank credit service providers. The legislation, however, would give these providers – including payday lenders, installment lenders, car title lenders, prepaid card issuers and check cashers – the ability to obtain a federal charter and sidestep the state laws.
 
The bill prohibits lenders from extending credit to a consumer unless there is a reasonable basis for believing the consumer can repay the loan, but, the attorneys general warn, it establishes no standards for determining ability to repay. The legislation also exempts loans with terms of one year or less from the disclosure requirements of the Truth in Lending Act and substitutes a cost metric. By preempting state laws, the proposed legislation would impede state efforts to immediately and directly protect consumers from harm, the attorneys general argue.
 
This bill has been assigned to a congressional committee that will consider the legislation and determine whether to send it to the full House or Senate.
 
Signing the letter were attorneys general from Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Georgia, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts Michigan, Minnesota, Mississippi, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Vermont, Washington, West Virginia, Wisconsin and Wyoming.