Payday Lenders Find Loopholes
MIAMI-Two state regulators said they have made inroads against payday lenders, but acknowledged the industry has been successful in finding loopholes in new laws.
Both of the regulators also project that new uniform licensing rules will be forthcoming.
Laura Udis, Administrator for the Colorado Fair Debt Collection Practices Act, said that Colorado has had some success in stopping predatory payday lending practices through a state act that makes payday loans similar to installment loans, capping loans at $500, with a $75 fee (plus a monthly handling fee) with the loan repaid over six months.
But the program is not without its loopholes, and she said that it's still too early to tell the effects of the law. There is nothing to stop consumers from taking out $500 loans from multiple lenders, and she said that the state still struggles with out-of-state lenders complying with Colorado laws.
Udis, along with William Lund, superintendent of the Maine Bureau of Consumer Credit Protection, spoke as part of a panel called "Seeing Your Future Through A Regulator's Prism," presented as part of the annual National Collections and Credit Risk Conference, held here recently. Both panelists are past presidents of the North American Collection Agency Regulatory Association.
Udis noted that states with a stronger licensing and enforcement presence don't see the same collections "horror stories...and consumer class action law suits that come from those horror stories."
Both panelists said that state regulators-including attorneys general and state bank supervisors-have been heavily involved in the creation of the Consumer Financial Protection Board, which Udis said is set to tackle payday lending and debt collection once it finishes examining the mortgage and credit card industries.
The fate of that Board, however, remains up uncertain in Congress.