Credo Action

Tell Congress: Oppose the Republican handout to payday lenders

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Petition to members of Congress:

"Tossing out bipartisan rules to crack down on illegal money-laundering in order to protect the worst of the payday loan industry is dangerous and wrong. I strongly urge you to oppose Rep. Luetkemeyer’s HR 4986 and any other proposals to undermine regulators on behalf of predatory lenders."

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    Tell Congress: Oppose the Republican handout to payday lenders

    Only House Republicans would be OK with making illegal money-laundering easier in order to bail out a predatory loan industry, but that’s exactly what they will do if we don’t speak up.

    For decades, both parties have supported current laws that force banks to keep their customers from moving illegal cash through the system. But ever since the Obama administration started using this power to crack down on outright fraud by payday lenders, the predatory lending industry has been in an uproar – and its supporters in the House Republican caucus are springing into action.

    A new GOP bill would “completely whitewash fraud,” according to the National Consumer Law Center, by undermining regulators’ authority.1 As you can imagine, predatory lenders are supporting it in a big way. But so are Tea Party activists who believe the Obama administration is engaging in political persecution, not fraud-fighting. It may seem crazy, but this is exactly the type of bill that can fly beneath the radar, propelled by special-interest cash and right-wing energy, so we need to to loudly declare our opposition.

    Tell Congress: Oppose the Republican handout to payday lenders.

    The payday lending industry has been under fire for years for outrageous and predatory practices. For the millions of “unbanked” Americans who don’t live near a bank or whose financial situation prevents them from opening a bank account, payday lenders can be the only option. But too often, these payday loans come with sky-high interest rates and misleading terms and conditions that trap desperate people into a cycle of debt. That’s why payday lending is banned in 15 states and regulated in far more.

    And amazing as it is, online payday lenders are even worse – going from predatory to outright fraud. Online lenders have been allegedly caught depositing money in customers bank accounts without asking then charging them for the “loan,”2 jacking up rates, and inventing new fees. In one case currently under federal prosecution, the lender is charged with illegally withdrawing money from customers’ bank accounts.3 Because these companies operate online and through shell companies that are sometimes overseas, they are a nightmare for financial cops on the beat.

    Federal law puts banks on the hook for preventing this kind of fraud, as well as massive illegal money laundering by shady enterprises. During the financial crisis, Wachovia – now part of Wells Fargo – was caught facilitating petty scams. Both Wachovia and HSBC were previously punished for drug money that was laundered through their banks. And just last year, the Justice Department filed a lawsuit against a North Carolina bank, Four Oaks, claiming that it had received more than $850,000 in fees by allowing payday lenders and others to process unauthorized transactions on customers account.

    While the Department of Justice is responsible for criminal charges, bank regulators are the first line of defense against wrong-doing like this – and the GOP’s new bill would render them toothless.

    Tell Congress: Oppose the Republican handout to payday lenders.

    Through a program called “Operation Choke Point,” the Obama administration has been using its regulatory authority to subpoena records and discourage banks from doing business with enterprises that may commit fraud. Choke Point focuses on industries where there are recurring problems, like payday lending or online gambling. It also discourages banks from using some third party payment processors that shady companies use to circumvent bank regulation.4

    The GOP bill is designed to gut “Operation Choke Point.” But it would go even further. The bill would bar regulators from doing anything to “restrict or discourage” banks from working with any company that has a business license and a legal opinion that its activities are not illegal. In other words, if the mafia or a drug syndicate get a cheap business license and a letter from an unethical lawyer, regulators’ hands would be tied.

    No legitimate business has had to close its doors due to the Obama administration’s fraud crackdown. But that hasn’t stopped the payday lending industry from whipping up a right-wing fervor. Because some third party payment processors work with gun stores, conservatives have painted these anti-fraud measures as a backdoor attempt to ban guns or go after companies liberals dislike. The FDIC was criticized for being overly broad when it listed the categories of companies that might face extra scrutiny, but it has already issued a clarification.

    Most importantly, Republicans still cannot point to a single ethical company that has faced real pressure because of “Operation Check Point.” This GOP bill is a giveaway to the payday lending industry that would put us all at risk, nothing more.

    The key to stopping legislation like this is making sure members of Congress know that we’re actually paying attention – so we need to raise our voices right now.

    Tell Congress: Oppose the Republican handout to payday lenders.

    Thanks for helping fight back against the payday lending industry.

    1. Zach Carter, "House Republicans Are Trying To Make Money Laundering A Lot Easier," HuffingtonPost.com, September 19, 2014.
    2. "CFPB Sues Online Payday Lender for Cash-Grab Scam," www.consumerfinance.gov, September 17, 2014.
    3. Carter, “House Republicans Are Trying To Make Money Laundering A Lot Easier,” September 19, 2014.
    4. The New York Times Editorial Board, "‘Operation Choke Point’ Hits the Mark," the New York Times, October 10, 2014.