Consumers Must Be Protected and Have Access to Short-Term Credit

When I established my first law practice, I relied upon a short-term loan to start the firm. At the time, this was the only avenue available to me. Now, as a member of Congress, I look back and recognize how vital that funding was to jumpstarting my long career in public service.

In an effort to ensure that others like me have continued access to payday loans, states such as Florida implemented regulations that make the industry more accountable to both consumers and legislators. The Florida approach is a model for other states that seek to achieve a balance between consumer protection and vital access to credit. It was forged by working with all parties involved in this issue including consumer groups, lenders, and even the U.S. Department of Defense. Dorene Barker, a lobbyist for Florida Legal Services, an advocacy group that led the fight against predatory lending, observed in 2001 when the Florida bill passed with overwhelming bipartisan support that, "this is going to protect consumers" and further expressed her support stating: "I'm really pretty excited about it. I think we've come up with a way to keep people from being caught in the debt trap."

I am an original cosponsor of a bipartisan piece of legislation that seeks to build off of the progressive Florida model on a national level. H.R. 4018, the Consumer Protection and Choice Act would establish rules that must be incorporated into state laws governing payday loans. These requirements include launching a database and background checks, preventing consumers from acquiring new loans if previous ones are outstanding, limiting interest fees to no more than 10 percent of a loan, and placing a cap of $500 on loans. If a state law does not meet the specifications of the bill, then federal regulations will govern short-term lending in that locality.

Considering the importance of H.R. 4018 to ensuring the safety of consumers and viability of a critical industry, I find the recent criticism over my colleague, Congresswoman Debbie Wasserman Schultz's support of the legislation bewildering. The Florida payday model has been protecting consumers for 15 years, and Congresswoman Wasserman Schultz was one of the chief scriveners of this legislation when she served in the State Legislature. That is why reports of criticism from Florida consumer groups of the Congresswoman's support for the Florida model are perplexing, especially given their positions in favor of the compromise bill when it passed.

I acknowledge that some people have been harmed by small lenders. Yet, such cases are far more common in areas that lack the tough standards present in Florida. It was Wall Street that caused the financial crisis, not payday loans. Further, those who claim to have consumers best interest at heart would be wise to silence their criticism of this bill that takes important steps to protect consumers including a 60 day grace period, if payment cannot be made on the assigned date and required financial counseling.

Put simply when the electricity is cut off, the water is turned off, the car payments are due, and the rent must be paid - poor people cannot go to big banks for a loan. They cannot even go to community banks for a $350 loan. They go to payday lenders. Threats to eliminate this industry are direct threats to the ability of American citizens to make ends meet and get ahead.

Last month, I received a letter from a constituent in Sunrise, Florida, who is a single mom trying to survive on a salary as an administrative assistant. She expressed her fear of not having access to short-term credit if she needed help covering bills, putting gas in the car, or buying groceries. If the Consumer Financial Protection Bureau (CFPB), moves forward with implementing the current rules they have proposed, it would put 70 percent of the industry out of business. What, then, may we expect if a majority of those currently providing short-term, small-dollar loans are forced to close their doors? In Florida, thousands of jobs across the state will be lost. But perhaps even more troubling, Floridians who use these services will be left with few legal options.

Financial protection comes in many forms, and we must ensure that meaningful and robust safeguards exist to prevent predatory lending practices. Both Congresswoman Wasserman Schultz and I want to ensure that our constituents, and people across this nation have access to short-term credit they need and are protected. To quote a June 15, 2015 editorial by Professor Jeffrey H. Joseph of The George Washington University School of Business, that appeared in the Tampa Tribune, "The CFPB's quest to eliminate payday loans and other short-term lending options will leave low-income Americans with few legal options to turn to when an emergency expense arises. That's hardly providing 'financial protection' to the Americans who need it most."

Congressman Alcee L. Hastings serves as Senior Member of the House Rules Committee, Ranking Democratic Member of the U.S. Helsinki Commission, and Co-Chairman of the Florida Delegation.