This federal payday loan bill, by Reps. Blaine Luetkemeyer (R., Mo.) and Joe Baca (D., Calif.) is a revision of an earlier bill. It includes changes to reduce criticism that this new piece of legislation is an attempt to circumvent CFPB.
If carried, this new federal charter would carry some specific rules, including prohibitions against loan periods of less than 30 days in duration. Payday loan lenders would have to evaluate a borrower’s ability to repay the payday loan. Nor could payday loan lenders charge borrowers fees for repaying early. (Note to the reader – this is not a problem in the PDL industry now.)
The new legislation, as proposed, would block regulators from capping the interest rate or fees that non-bank lenders could charge for loans made under the federal charter, which would allow these lenders to navigate current state usury laws.
The OLA (Online Lenders Alliance), a trade group representing companies that offer short-term loans via the Internet, is in support of this new federal payday loan bill.
OLA President Lisa McGreevy was quoted as stating, “A federal charter, as opposed to the current conflicting state regulatory schemes, will establish one clear set of rules for lenders to follow. This will lead to the creation of innovative financial products for consumers demanding them.”