Groups say bills before House committee hide true cost of cash advance apps, erase consumer protections

WASHINGTON, D.C. – The U.S. House of Representatives Financial Services Committee will vote tomorrow morning on several pieces of legislation that could harm consumers. The Center for Responsible Lending (CRL) joined dozens of advocacy organizations in letters opposing two of these bills: the “Earned Wage Access Consumer Protection Act” (H.R. 7428) and “The Financial Services Innovation Act” (H.R. 7440).

“High-cost lenders have a well-documented history of targeting and exploiting for profit hardworking Americans – particularly in Black and Latino communities – with loans that feature triple-digit interest rates, excessive fees and hidden recurring charges,” said Andrew Kushner, senior policy counsel at the Center for Responsible Lending. “Legislators should not give unscrupulous lenders free rein to create debt traps for low wage and low wealth workers trying to reach or maintain financial stability by allowing these predatory loan products in the name of financial innovation.”

In their letter opposing the cash advance legislation (H.R. 7428), nearly 190 labor, civil rights, consumer and other groups state, in part:

In the guise of offering protections, the bill obscures its true effect: to exempt fintech cash advances from the Truth in Lending Act, to endorse a form of loan that makes workers pay to be paid, and to facilitate new evasions by payday lenders...

The bill would obscure the relative cost of these fintech cash advances…. The bill perpetuates the myth that these fintech cash advances are not credit... The bill would undermine or block coming guidance from the Consumer Financial Protection Bureau (CFPB)...

In a separate letter opposing The Financial Services Innovation Act (H.R. 7440), which encourages regulatory “sandboxes,” more than 30 consumer advocacy groups state, in part:

“This legislation encourages new and unproven companies to evade existing consumer protection laws and regulations…. The end result would be a ‘Sahara desert’ of consumer protections.

The proposed application process is wholly inadequate and will result in rubber stamping petitions for approval...

Companies would be allowed to force other parties into arbitration...

Companies would be granted “get out of jail free” cards by simply filing a petition...

###

Press Contact: Alfred King alfred.king@responsiblelending.org