Bill Would Add Consumer Protections and National Fee Structure to Payday Loans

Washington, DC – Congressman Joe Baca (D-Rialto) has introduced legislation in the House of Representatives to reform the $40 billion a year payday advance loan industry.  H.R. 1846, the Consumer Lending Education And Reform (CLEAR) Act, reforms the industry and eliminates fly-by-night lenders through increased consumer protections, strict fee structures, and enhanced disclosure requirements from lenders.

“I am proud to introduce the CLEAR Act, legislation which will protect American consumers and includes strong oversight measures to put the fly-by-night lenders who take advantage of the vulnerable out of business,” said Rep. Baca.  “By imposing stiff penalties on the lenders who refuse to comply with the bill’s regulations, the CLEAR Act will reform the payday advance industry and assist those hard-working Americans who need access to short-term credit.”

The CLEAR Act would:

• Cap fees at $0.15 for every $1 loaned, plus allow for a 5% origination fee on Internet loans only;
• Cap fees on first time loan refinancing at $0.15 for every $1 loaned, and lower the cap to $.10 for every $1 loaned upon a second refinancing. Origination fees on loan refinancing are prohibited;
• Require creditors to offer an extended payment plan if a borrower notifies the creditor that the borrower cannot repay the loan before its original due date;
• Create a federal standard for short term loans by preempting existing state laws;
• Require lenders to obtain bonding, thus eliminating fly-by-night lenders and scam artists;
• Require lenders to follow the Fair Debt Collections Practices Act (FDCPA); and
• Require lenders to advise borrowers of the availability of free credit counseling.

“During these times of economic difficulty, we must ensure that students, blue collar workers, teachers, police officers and others have access to legitimate payday advance loans if needed,” said Rep. Baca.  “The CLEAR Act provides a national regulatory framework that ensures residents of all fifty states will have access to payday advance loans with strict fee structures that prevent them from incurring exorbitant interest charges.”  

“When it comes to lending, full oversight, disclosure and strong consumer protections should be the law of the land,” concluded Rep. Baca.  “This legislation moves to clean up the industry with new regulations and tough sanctions against those lenders who refuse to follow reasonable terms and full disclosure principles, while also ensuring working Americans have access to the credit they need.”