Dems Attempt to Federally Enforce State Usury Laws with Introduction of SAFE Lending Act

A group of Democratic senators and representatives, lead by Senator Jeff Merkley introduced a bill on February 13th called the Stopping Abuse and Fraud in Electronic (SAFE) Lending Act of 2018 that would require small dollar lenders to register with the Consumer Financial Protection Bureau (CFPB) and adhere to state usury caps when offering credit to consumers. The federal government does not currently mandate licensing or registration for small dollar lenders, and the Dodd-Frank Act expressly forbids the CFPB from setting interest rate caps for small dollar loans.

Sen. Tammy Baldwin (D- WI), a co-sponsor of the bill, explained, “we need the Consumer Financial Protection Bureau to work for American consumers, not powerful Washington interests like the predatory payday loan industry. But the Trump Administration is letting them write their own rules so it’s important that we act.”

Sen. Merkley added, “President Trump seems determined to turn the Consumer Financial Protection Bureau into the Payday Predator Protection Bureau, making state laws like Oregon’s all the more important. Along with Congresswoman Bonamici and dozens of our colleagues, we’re sending a strong message: Protect states’ rights to protect their consumers.”

The SAFE Lending Act stands as a troubling initiative by some in Congress to effectively impose state laws upon sovereign tribal lending entities (TLEs). The tone and effect of the bill is similar to an attempt last year by the CFPB to use its enforcement statute to impose state usury and licensing laws on a group of TLEs. That case was recently voluntarily dismissed by the Bureau.

In a revised strategic plan for the consumer agency, CFPB Interim Director Mick Mulvaney promised to respect tribal sovereignty. However, it now appears the misinformed and harmful enforcement approaches of his predecessor are now serving as the basis for proposed legislation in Congress.