Lobbying by pay-day loan firms is paying off

The Center for Responsible Lending (CRL), a non-partisan group, doesn't mince words. CRL has studied the practices of pay-day loan companies and concludes that they operate in a way that "amounts to nothing more than legal loan sharking." Attempts to rein in the lending practices of pay-day firms have gone nowhere up to now.

Why? Partly because pay-day loan companies have invested heavily in lobbying to fight this kind of oversight. According to TPMMuckraker, a Senate bill designed to strengthen protections for consumers haven't made much headway in the area of pay-day loans:

The new consumer agency to be created by the bill will have the authority to enforce regulations for large pay-day lenders, according to a summary of the bill prepared by the Senate Banking committee.

... But what counts as large? There's the rub.

In order to define a pay-day lender as large, and therefore subject to enforcement, the new agency would have to conduct a rule-making process, according to consumer advocate Ed Mierzwinski of the U.S. Public Interest Research Group, who has examined (Sen. Chris) Dodd's proposal.

That's an arduous process that can take six months or more, and would require the agency to "jump through a number of hoops," Mierzwinski told TPMmuckraker. And even then, he said, the rule can be challenged.

Compare this to the bill that was approved by the House of Representatives late last year. The House bill gave the new financial-consumer agency complete authority to draft and enforce rules against all pay-day loan companies.

There's still time for a better bill to pass, but it's disappointing to see the direction the Senate bill has taken. Meanwhile, pay-day firms are still fighting any provision that would regulate any company in their industry -- large or small.

CREW has closely examined the tactics used by pay-day loan firms. Last April, we released the report Payday Lenders Pay Up, which studied the industry's all-out lobbying and PR campaign to fight off public scrutiny or regulation.