Opinion: Protect Alaskans from predatory lenders

Opinion: Protect Alaskans from predatory lenders

Don’t protect a predatory industry’s huge profit margins.

  • Monday, February 25, 2019 7:00am
  • Opinion

It seems obvious that lenders should not make loans to people who cannot afford to repay the loan. But that commonsense principle of consumer lending is being turned on its head by predatory payday lenders. To these unscrupulous financial actors peddling triple-digit interest rate loans, borrowers who struggle to repay are the real money makers. And new Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger just proposed greenlighting payday lenders’ money grab.

Once consumers’ trusted watchdog and a top ally in Washington, D.C., the CFPB designed a rule to limit debt trap payday loans. The rule, issued in 2017 and slated to take effect in 2019, would prohibit payday lenders from making more than six loans a year to a borrower without assessing the borrower’s ability to repay the loans, similar to the way credit card companies do. But under the leadership of Kraninger, the bureau has proposed to largely repeal the common-sense rule imposing limits on payday lenders that entrap borrowers in unaffordable loans.

[Governor proposes cutting almost half of university’s total operating budget]

According to a report from the Center for Responsible Lending, Alaskans pay $6 million each year in fees and interest on payday loans, with annual percentage rates as high as 435 percent. Instead of being pumped back into our local economy, each year $6 million, taken from the most vulnerable low-income Alaskans, goes to outside corporations like Money Mart, a payday lender issuing loans in Anchorage while operating out of Victoria, Canada.

Over 80 percent of payday loans are either rolled over into a new loan to cover the previous one or are renewed within 14 days of repayment. Half of all payday loans are part of a sequence of 10 loans or more. These second, third and fourth loans come with new fees and push borrowers into a debt trap. It’s no wonder why predatory payday lenders prefer borrowers who will struggle to repay their loans. It is this long debt trap that the original CFPB rule is designed to prevent.

[Opinion: University of Alaska Anchorage focused on reapplying for accreditation]

The payday lending industry couldn’t be happier about efforts to weaken the rule. But the numbers don’t lie. Predatory loans are hurting Alaskans and we must not allow Wall Street and foreign bank-backed payday lenders to get the last word.

The public has until mid-May to tell the CFPB what we think. Representing the best interest of all Alaskans, with our financial well-being top of mind, U.S. Sens. Lisa Murkowski and Dan Sullivan, and U.S. Rep. Don Young must join Alaskans in calling on Kraninger to give teeth to the final payday rule and include the ability-to-repay requirement. The CFPB must remain true to its consumer protection mission: protect Alaskans from predatory lenders, don’t protect a predatory industry’s huge profit margins.

• James J. Davis, Jr. lives in Anchorage and is a founding partner of Northern Justice Project, where he represents low-income Alaskans and Alaska’s tribes. My Turns and Letters to the Editor represent the view of the author, not the view of the Juneau Empire.

More in Opinion

Have something to say?

Here’s how to add your voice to the conversation.

U.S. Sen. Dan Sullivan addresses a joint session of the Alaska State Legislature in the House chambers on Feb. 7, 2023. (Mark Sabbatini / Juneau Empire file photo)
Opinion: Sen. Sullivan sinks to a new low

Last week, Sen. Dan Sullivan mimicked Donald Trump’s endless stream of baseless… Continue reading

Members of local business organizations greet cruise passengers with maps and other handouts as they disembark from the Norwegian Bliss on April 25, 2022. (Michael S. Lockett / Juneau Empire file photo)
A call for collaboration, not restrictions on cruise ship tourism

Please don’t sign. I feel it is time to speak up about… Continue reading

Juneau School District Superintendent Frank Hauser provides an overview of restructuring options being considered during a Community Budget Input Session at Thunder Mountain High School on Jan. 31. (Mark Sabbatini / Juneau Empire file photo)
Opinion: Smearing school board members and the superintendent is vindictive and destructive

A school consolidation plan announced by the Juneau School District (JSD) has… Continue reading

(Juneau Empire file photo)
Letter: Gloomy predictions for ship-free days are a misleading scare tactic

“What? Only one day a week ship-free? Can’t we have Sundays too?”… Continue reading

(Juneau Empire file photo)
Letter: A day of rest from cruise ships is good for Juneau

A lot has been said about the Saturday free day from large… Continue reading

(City and Borough of Juneau photo)
My Turn: Property tax assessment and guardrails

The “money grab” by the CBJ Assessor’s Office is over with passage… Continue reading

Most Read