News Release

DNC Head Wasserman Backs “Loan Shark” Payday Lenders

9780674286061-lg-1Huffington Post reports: “DNC Chair Joins GOP Attack On Elizabeth Warren’s Agency.” See in Esquire: “It’s Time for DNC Chair Debbie Wasserman Schultz to Ride Off into the Sunset,” and “Debbie Wasserman Schultz Shouldn’t Be Welcoming Loan Sharks Into the Democratic Party,” by Tim Canova, who is challenging Wasserman in the Democratic Party primary.

MEHRSA BARADARAN, mehrsa at gmail.com, @MehrsaBaradaran
Baradaran is author of the new book How the Other Half Banks from Harvard University Press. She is associate professor at the University of Georgia School of Law where she teaches contracts and banking law. Baradaran is currently in NYC and will be in D.C. on March 10 and 11.

She said today: “All of the headlines have portrayed this as some sort of political catfight between two top DNC leaders, but it is nothing of the sort. The CFPB [Consumer Financial Protection Bureau] is not ‘Warren’s Agency,’ though it was her brainchild. The fight is much bigger than a Wasserman/Warren feud. This is the DNC siding with payday lenders over people. It is no wonder voters on the left and the right have lost faith in the establishment.

“Wasserman wants the CFPB to back away from their payday lending rules for two years. This would kill their momentum on the notice and comment rulemaking they have been engaged in for the last several years and would assure an even weaker bill once it was passed after the delay. In the agency context, delay means death for many bills.

“Wasserman wants state pre-emption of payday lending rules. What this means functionally is no payday lending rules. This is because payday lenders can work online and from Native American reservations or charter in states with weak consumer protection laws and operate in other states. This is the EXACT reason the CFPB was created. Federal oversight is the only thing that works when different state rules create a race to the bottom.

“The Office of the Comptroller of the Currency (OCC) was engaged in federal pre-emption of state consumer laws for the decade before the financial crisis. This is why so many predatory and fraudulent mortgages did not get caught. The OCC allowed state rules to govern and many states did not have good rules and those that did, the OCC pre-empted. Thus, the lack of oversight created a predatory and fraudulent market. Making the CFPB impotent against payday lenders would create the same dynamic.

“I am glad Wasserman’s actions came to light and there is some pushback, but often these bills do not get sufficient media attention because there aren’t as many well-funded and well-organized consumer protection groups as there are interested payday lender lobbies. I hope this is a warning to all policymakers that the public is now paying attention.

“Payday lenders are modern day loan sharks. The industry has ballooned in the last two decades as banks have abandoned low income neighborhoods. They profit off of the desperation of poor borrowers by charging the maximum interest rates allowable by law (up to 2000 percent APR in some circumstances). Any policymaker that defends this industry is more interested in campaign contributions than alleviating the very real suffering of their constituents.”