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CFPB Takes First Step With New Federal Payday Lending Rule, but Maine Must be on Guard

Written by New Ventures Maine | Published on November 13, 2017

Written by Jody Harris, who is the Associate Director for the Maine Center for Economic Policy and serves as the policy lead on working poor families. Jody holds a master’s degree in public administration from the University of Maine and has served as town manager for two Maine towns. Learn more at

Just yesterday, the federal Consumer Financial Protection Bureau (CFPB) released a new rule that will reduce the harm to Maine families of short-term payday lending. But the new consumer finance protections are already under attack by the very lenders who profit from this kind of predatory lending. It is now more important than ever that our congressional delegation and state legislators pass and strengthen laws that protect Maine families from abusive and usurious lending.

For years while ignoring state laws, payday lenders have preyed on Maine consumers struggling to make ends meet, charging annual interest rates as high 217% and trapping them in an endless cycle of debt. Payday lending costs Maine families half a million dollars per year in just fees, not including interest.

Predatory lenders drive borrowers into financial distress raiding their bank accounts and pushing second and third loans to pay off the first. Borrowers take out on average 10 payday loans a year and routinely pay more in fees than the amount they borrow. What is marketed as a quick fix for a cash shortage turns into a spiral of unpaid bills, overdraft fees, closed bank accounts, and even bankruptcy – which ruins credit scores and financial health.

In issuing its new rule, the CFPB recognizes the harm of the payday lending trap, which robs people of their ability to recover from a financial shortfall by pulling them deeper into debt. The rule puts important safeguards in place for Maine families, like requiring payday lenders to determine whether a borrower can afford to repay the loan—a routine practice already required of banks, credit unions, and credit card companies.

But now, the payday lending industry is pressuring Congress to overturn the new consumer protections. The Financial Choice Act, passed in the House and pending in the Senate, would demolish the Dodd-Frank Wall Street financial reform law, which created the CFPB. It would eliminate all CFPB jurisdiction over payday loans stopping it from protecting consumers from the unaffordable lending at the heart of the payday debt trap. It would also prevent the CFPB from taking action against payday lenders for violating existing laws.

And the Choice Act would preempt Maine’s state cap on interest rates.

Not only are payday lenders aggressively pushing legislation at the federal level, they are attacking state laws. The payday industry has targeted Maine as part of a coordinated national agenda to loosen our laws so they can make triple-digit interest rate loans that push Mainers into debt and poverty. Last year, payday lobbyists urged Maine to authorize dangerous long-term loans, a cousin to payday loans, which, thankfully, lawmakers defeated.

As CFPB’s new rule puts in place first-step federal protections on short-term, high-interest payday loans, Maine’s elected leaders need to do all that they can to stop predatory lenders from cheating Maine people for profit.