Steve Muehler's Plan to Ban all Non-Bank Payday Loan Lenders.
North Carolina Attorney General Josh Stein recently joined the opposition to a Federal proposal that would scuttle State regulations of payday lending.
Stein is one of 24 State Attorney Generals opposed to the Federal Deposit Insurance Corporation regulations that would let predatory lenders skirt state laws through “rent-a-bank” schemes in which banks pass along their exemptions to non-bank payday lenders.
The State of North Carolina successfully drove payday lenders out of the State years ago, but in recent months, the Federal Government put forward proposals that would allow these predatory lenders back into the State so they can trap North Carolina Residents in devastating cycles of debt. Mr. Stein is urging the FDIC to withdraw this proposal.
The proposed FDIC regulations would extend the Federal Deposit Insurance Act exemption for federally regulated banks to non-bank debt buyers. Opponents say the rule deliberately evades state laws banning predatory lending and exceeds the FDIC’s authority.
Payday loans carry interest rates that can exceed 300% and typically target low-income borrowers. The payday lending industry is worth an estimated $8 billion annually.
States have historically taken on predatory lending with tools such as rate caps to prevent companies from issuing unaffordable, high-cost loans. North Carolina’s Consumer Finance Act limits licensed lenders to 30 percent interest rates on consumer loans. In January of 2020, Stein won an $825,000 settlement against a payday lender for violating state law that resulted in refunds and outstanding loan cancellations for North Carolina borrowers who accessed the lender.
North Carolina has been a leader in curbing payday lenders since it became the first state to ban high-interest loans such as auto title and installment lenders in 2001.
North Carolina adopted payday lending in 1999, but grassroots advocates convinced lawmakers to outlaw the practice. Some larger payday lenders responded by partnering with out-of-state banks as a way to circumvent the law, but the state blocked that tactic. There have been no payday loans available in North Carolina since 2006.
In following North Carolina lead, under my Administration we would Ban all forms of Non-Bank Payday Loan Lending, and implement rules and regulations that (1) outlaws the "rent-a-bank" scheme, and (2) caps that excessive rate of interest at a rate that is no greater than 15% per annum.