It’s time to act on payday lending rules

The recent Powerball jackpot that garnered media headlines across the country was estimated around $1.5 billion. Impressive, and record breaking.

Yet it pales in comparison to the amount stripped from families by payday and other predatory lenders each year across America.

Cedar Rapids passed a payday loan ordinance in 2013 restricting where payday lenders could locate within the city, as have 8 other Iowa cities since 2010. However, not enough progress has been made to combat this wealth-stripping because despite strong bipartisan grass roots support, the Iowa Legislature has failed in recent years to take statewide action.

That's why it was a relief to hear a few years back that federal regulators were going to step in and do something about it.

In 2014 the Consumer Financial Protection Bureau (CFPB) announced it would draft rules to help curb the devastating effects predatory lending inflicts upon our communities. In March of 2015 they released a 'first look” of a rule that, while not perfect, would do enough to protect families from the some of the worst abuses of predatory lending.

Now we are into 2016 and long overdue for the CFPB to take action before more billions are stripped from our communities.

Between the date the draft proposal by the CFPB was released and today, predatory payday lenders and others have stripped just over $7 billion from our communities in fees and outrageous interest. You can see the amount for yourself at familiescantwait.org.

Payday loans aren't just expensive one-time loans - they're designed to keep borrowers in debt every time they get a paycheck. Payday lenders make three quarters of their fees from borrowers who take out 10 or more loans. In Iowa, the average borrower takes out 12 or more loans in a given year.

Nationally, nearly $10 billion each year is stripped by loans that are advertised as 'hassle free” and 'easy money” yet is anything but when the borrower comes back because the loan is due in full each payday - no exceptions.

That's why the average payday borrower ends up paying back $450 or more for a $300 loan. $450 that won't be spent on groceries, school supplies, clothing, and so much more. And that's $450 or more that won't stay in our communities, given that these lenders are largely headquartered out of state.

That's money that doesn't stay in our communities and doesn't create new jobs and certainly doesn't keep our families from falling over the financial edge.

The CFPB's 'first look rule” can work to reverse this wealth drain. It can work so long as it maintains an affordability standard that ensures payday lenders make sure people can pay back their original loan without re-borrowing or defaulting on other bills.

Because of this delayed action from the CFPB, Iowa CCI Action Fund and other state and national groups have joined the Families Can't Wait campaign, calling on the CFPB to finish the job and finally put an end to abusive predatory lending by issuing a strong rule with no loopholes the predatory lending industry can exploit.

Enough is enough. The longer we wait, more families will be left out in the cold waiting for relief, and the payday loan industry will keep throwing money at Congress to thwart efforts at reform. We can't let that happen. It's time for the CFPB to move forward - our families can't wait.

' Matthew Covington is a predatory lending organizer with Iowa CCI Action Fund. matthew@iowacci.org www.cciaction.org