Video: How We Can Stop Abusive Online Payday Lenders

At its core, payday lending is simply a legal form of loansharking.

In 2007, as Speaker of the Oregon House, I took on the payday lenders that were charging Oregonians outrageous interest rates and stripping huge amounts of wealth from working families — and won.

Payday loans, which use the payday borrower’s next paycheck as collateral, often carry interest rates as high as 500%.

Not surprisingly, 80% of borrowers can’t pay back those loans in time and many become stuck in a vortex of debt. In Oregon, we passed important consumer protections, balancing the availability of credit while capping consumer lending fees that can quickly pull hardworking families underwater.

Unfortunately, in recent years, many of these abusive, predatory lenders have found new ways to gouge vulnerable families and evade existing consumer protection laws by moving offshore and online.

To show how payday lenders are trapping borrowers, and what we can do about it, I made a whiteboard video that explains in just a few minutes how these unscrupulous lenders are evading existing laws, and how my new SAFE Lending Act will help crack down on some of the worst abuses of the payday lending industry — particularly in online payday lending.

Here’s the problem: online payday lenders hide behind layers of anonymous websites and “lead generators” to dodge enforcement. Even when the lending violates the law, these abusive payday lenders can drain a consumers’ bank account before they have a chance to assert their rights. But it gets worse. Payday lenders with access to consumers’ bank accounts can also issue money from loans on prepaid cards that include steep overdraft fees and other hidden costs, piling on more and more costs to an already expensive loan.

In a 21st century economy, it’s critical that our laws keep up with new, predatory threats to working families’ pocketbooks.

It’s up to us to help keep hardworking families from being caught in a vortex of debt.

I’ll keep fighting to ensure Congress and the Consumer Financial Protection Bureau both take every possible step to stop unscrupulous lenders in their tracks and keep them from preying on hardworking families.

Learn more about my SAFE Lending Act on my website: Merkley.senate.gov