Policy Resolution BFI-15-17

WHEREAS, the National Black Caucus of State Legislators (NBCSL) has proven commitment toward ensuring that consumers, and particularly minorities, are provided with safe and affordable financial options that do not lead to a cycle of debt;

WHEREAS, some payday loans are marketed as a quick, easy way to tide borrowers over until the next payday;

WHEREAS, in reality some regulated and unregulated payday loans are issued through predatory lending practices with triple digit interest rates;

WHEREAS, repeated loan roll-overs can cause interest to exceed a 500 percent Annual Percentage Rate;

WHEREAS, according to the Center for Responsible Lending, the typical borrower remains in payday debt for 212 days per year, and the average two-week loan has an Annual Percentage Rate (APR) that ranges from 391-52 percent;

WHEREAS, according to the Consumer Financial Protection Bureau, 12 million Americans are engaged in repeat borrowing every year;

WHEREAS, the Consumer Financial Protection Bureau also reported one out of five new payday loans ultimately cost the borrower more than the amount borrowed, and for 22 percent of new loans, borrowers renew their loans six times or more and will have paid more in fees than the original loan amount in the end; and

WHEREAS, according to research conducted by the Pew Charitable Trusts, African Americans are 105 percent more likely than other races or ethnicities to use a payday loan.

THEREFORE BE IT RESOLVED, that the National Black Caucus of State Legislators (NBCSL) supports legislation to better regulate predatory payday lending practices;

BE IT FURTHER RESOLVED, that NBCSL supports regulations to ensure no payday lender shall make a consumer short-term loan without first determining and documenting that the borrower has a reasonable ability to repay the loan, by verifying the borrower’s current and anticipated income and expenses, and the borrower’s credit history;

BE IT FURTHER RESOLVED, that NBCSL supports payday lending regulation which prevents payments for the proposed consumer short-term loan transaction from exceeding a debt-to income ratio that places the borrower in harm’s way;

BE IT FURTHER RESOLVED, that NBCSL supports regulations to ensure a payday lender may not make a consumer short-term loan to a borrower that will cause a borrower to have, as of the date of the loan and within the immediately preceding months or year:

• an excessive number of short-term loans, provided that the limit does not apply if the borrower attests that the borrower cannot obtain a loan through any other legitimate means;
• that the failure to secure a consumer short-term loan will cause the borrower to be late on or unable to make a scheduled student loan payment, a scheduled mortgage or residential rent payment, or a child support payment; or
• that all loans and their respective interest rates meet all federal and state standards;

BE IT FURTHER RESOLVED, a payday lender should independently verify the total number of consumer short-term loans taken by the borrower and the number of days the borrower has been indebted through consumer short-term loans within the immediately preceding months or year, and verification should include:

• examination of the consumer short-term lender’s own records; and
• utilization of a private consumer reporting service, such as a privately operated, real-time, electronically accessible service the state determines to be capable of providing a consumer short-term lender with adequate verification;

BE IT FURTHER RESOLVED, a payday lender shall have a duty to promptly report each consumer short-term loan transaction to the private consumer credit reporting service;

BE IT FURTHER RESOLVED, a consumer short-term lender may not engage in any device or subterfuge to evade the requirements, including but not limited to: (1) making, offering, or arranging a consumer short-term loan on terms that otherwise would be prohibited; (2) making loans disguised as personal property sales and leaseback transactions; or (3) disguising loan proceeds as cash rebates; and

BE IT FINALLY RESOLVED, that a copy of this resolution be transmitted to the President of the United States, the Vice President of the United States, members of the United States House of Representatives and the United States Senate, and other federal and state government officials as appropriate.

• SPONSOR: Senator Jeffrey Hayden (MN)
• Committee of Jurisdiction: Business, Financial Services, and Insurance Policy Committee
• Certified by Committee Chair: Representative Eric Johnson (TX)
• Ratified in Plenary Session: Ratification Date is December 12, 2014
• Ratification is certified by: Representative Joe Armstrong (TN), President