American Legislative Exchange Council (ALEC) member companies are profiting from the Trump administration’s deregulation frenzy. The CAFTA is of course the corporate invoice mill that provides a library of lobbyist-drafted or approved “model legislation” to lawmakers in right-wing states across the country.
Advance America is the largest payday loan lender in the United States, with 2,500 locations. The company did not respond to our call about its latest activities, but in 2014, Advance America was listed as a “fiduciary level” financial sponsor of the CEFTA.
The Trump administration’s treatment of Advance America and the predatory payday loan industry shows how Trump’s “administrative state deconstruction” teams often pit low incomes and working poor against giant corporations, companies that enjoy the protection of politicians who take their money.
CFPB SECALS THE PAYROLL LOANS SECTOR
The Center for Media and Democracy calculated the numbers and Advance America has received more than $ 40 million in class action payments, fines and restitution from cases brought by state attorneys general since 2009. The company was found to deceive consumers by overcharging and passing on hidden charges. In some cases, when people allow withdrawals from bank accounts to pay off the loan, the banks also charge a fee.
This type of predatory loan has prompted the Consumer Financial Protection Bureau (CFPB), the federal consumer agency championed by US Senator Elizabeth Warren and President Obama, to crack down on the industry.
Among other things, the CFPB issued a rule in 2017, which would have forced the payday industry to “reasonably determine that the consumer has the capacity to repay the loan”, and would have prevented lenders from attempting to collect payment from accounts. banking people in ways that accumulate excessive fees. The rule would also have required payday loan companies to notify consumers before attempting to withdraw payments from their account.
But when President Trump appointed Mick Mulvaney to head the CFPB, he literally put the fox in charge of the chicken coop.
MULVANEY MAKES havoc at CFPB
Many consumer groups, including Americans for Financial Reform and US PIRG, consider Trump’s appointment of Mulvaney to be illegal. Mulvaney already had a post of Director of the Bureau of Management and Budget. The CFBP already had an interim director as provided by law, the longtime CFPB deputy director Leandra English. Now the matter is before the courts and a federal judge is expected to rule soon. But Mulvaney didn’t wait for the courts to rule, he got to work.
Advance America, owned by Mexican conglomerate Grupo Salinas, is headquartered in Spartanburg, South Carolina. Mulvaney’s Old Home Quarter includes parts of Spartanburg.
As a Republican member of the United States from South Carolina, Mulvaney took over $ 62,000 from payday lenders. This week, he gave a speech to the American Bankers Association and explained to them how his office works.
“We had a hierarchy in my office in Congress,” Mulvaney said. “If you’re a lobbyist who’s never given us money, I haven’t spoken to you. If you’re a lobbyist who gave us money, I could talk to you.
Well, Mulvaney seems to have applied this policy all the way down to the nation’s largest consumer protection agency. In December 2017, Mulvaney renounced its responsibility to protect consumers by deciding to postpone the new payday lender rule indefinitely.
By putting the rule on ice, Mulvaney is helping Advance America and other payday lenders by allowing them to continue to lend short-term money without a proper borrower credit check.
Then he dropped the CFPB’s lawsuit against four predatory lenders who were illegally granting loans at astonishing 950% APR in at least 17 states. Mulvaney even wants to dig deeper into the critically important public database where consumers can register complaints against abusive financial companies, NPR reports this week.
There is a need for short-term loans in times of economic distress for consumers and especially for those who are unbanked – do not have access to affordable community banks or credit unions in their neighborhoods – but the industry has a long history of charging excessive fees and interest rates, up to 500% per annum in some states, then suing borrowers and garnishing wages for repayment.
Payday loans “trap borrowers in an unaffordable cycle of debt, causing serious financial damage such as bank penalties, defaults on other bills or even bankruptcy.” Mulvaney’s action “shows contempt for the protection of consumers and the low-income communities that are targeted by these debt trap loans,” says public interest group Stop the Debt Trap.
The history of state attorneys general lawsuits and class actions against Advance America, summarized below, as well as the fact that almost all payday lenders do business in multiple states clearly show the need for federal legislation, and not just state oversight, which could be patchy. in some states.
2018: Advance America was forced to pay the State of California $ 160,000 and reimburse clients $ 88,000 for charging above-law interest rates and for using lead generators to find borrowers, a practice prohibited by California law.
2015 : Advance America Agrees to Pay $ 8 Million in Loan and Interest Charges to Pennsylvania Customers and Cancel $ 12 Million in Loans, for Exceeding State Interest Rate Limits by Charging Fees excessive amounts to bypass the government’s interest rate cap. “We maintain that this company has disguised its outrageous interest rates as a fee, misleading consumers and breaking the law,” former state attorney general Kathleen Kane said. “Payday loan practices negatively impact vulnerable consumers and often force them into a cycle of debt that many cannot recover. “
2010: Advance America settles a class action lawsuit in North Carolina paying 140,000 customers $ 18.75 million in damages. In both categories, the largest of its kind against a payday lender and the state attorney general accused Advance America of imposing excessive fees and fines.
2009: Advance America agrees to pay a minimum of $ 2 million to Georgian borrowers to settle all class action claims in the state. The average borrower would be paid up to $ 90 to settle lawsuits that alleged the company violated state law by charging excessive fees to bypass interest rate caps.
Mary Bottari contributed to this report.