AG Jepsen, Banking Commissioner: Federal Payday Lending Bill
Would Harm State Efforts to Protect Consumers
This news release was issued jointly with the Attorney General's Office
October 5, 2012
Attorney General George Jepsen and Department of Banking Commissioner Howard Pitkin today said they opposed federal legislation that would preempt state licensing laws regulating payday lenders because the proposed bill would end the state’s ability to protect Connecticut consumers against abusive loans and high interest rates.
Attorney General Jepsen has joined with 40 attorneys general from around the country in writing to Congressional leadership to express opposition to H.R. 6139, known as the Consumer Credit Access, Innovation and Modernization Act.
In place of state safeguards – licensing requirements that protect consumers and limit the amount of interest a payday lender can charge – the proposed bill exempts certain payday loans from the disclosure requirements of the Truth in Lending Act and allows payday lenders to charge interest rates that violate Connecticut law.
“Recent multistate settlements, such as the national mortgage foreclosure settlement, very clearly demonstrate just how effective the states can be in working together on a bipartisan basis on behalf of consumers," said Attorney General Jepsen. “Our Department of Banking is far better equipped to enforce laws that protect state consumers from predatory lending practices, and this legislation would directly undercut our efforts to do just that.”
“It is far better for citizens to contact state authorities with a financial emergency than our federal counterparts,” said Commissioner Pitkin. “The Connecticut Banking Department’s record of assistance to consumers has been a strong one and we are ably equipped to handle these issues for the people of Connecticut.”
Current state law requires that payday lenders that issue loans to Connecticut borrowers be licensed by the Department of Banking and imposes interest rate restrictions on the loans they issue.
Payday loans are small-dollar, short-term loans that borrowers promise to repay out of their next pay check. They typically have extremely high interest rates and are marketed to minorities and the working poor.
Assistant Attorney General Matthew Budzik, head of the Office of the Attorney General’s Finance Department, is assisting the attorney general with this matter.