Local & State
|State Attorney General takes on federal rules for payday lending|
|Josh Stein appeals FDIC regulation|
|Published Thursday, February 13, 2020 12:07 pm|
|North Carolina Attorney General Josh Stein joined 24 other attorneys general to oppose federal rules that would overturn state regulation of payday lending.|
North Carolina Attorney General Josh Stein is joining the opposition to federal proposal that would scuttle state regulation of payday lending.
Stein is one of 24 state attorneys general 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.
“We successfully drove payday lenders out of North Carolina years ago,” he said. “In recent months, the federal government has put forward proposals that would allow these predatory lenders back into our state so they can trap North Carolinians in devastating cycles of debt. We cannot allow that to happen – I urge 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, 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.
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