National Debate Continues Over Proposed Payday Lending Bill

Share Article

The bipartisan proposed legislation focuses on national regulation standards for online lending resources such as and storefront providers

The short-term lending issue will likely garner further attention

Lawmakers and lending agencies continue to debate the role of online short-term loan resources, including the way they are regulated. The issue rose to national prominence following a bill sponsored by Missouri Republican Representative Blaine Luetkemeyer and Joe Baca, a Democrat Representative from California. The proposed bill would allow online lending resources such as to offer services, messaging and promotions more consistent with storefront lenders in each state.

Lending companies that currently offer online services are required to adhere to regulations put in place in each state and supporters of the bill argue federal oversight would reduce overall confusion. Supporters include lending companies that cater to both online users and storefront customers at a local and national level. Lenders supporting the bill claim consistent national regulation would make it easier to promote short-term financial products to a broad demographic of consumers, regardless of their place of residence or jurisdiction.

According the, the Consumer Financial Protection Bureau currently has the authority to regulate short-term lenders in a federal capacity. Online lenders must adhere to the federal standards put in place in addition to the rules and regulations surrounding individual states such as Washington, which restricts loan amounts to $700 or 30% of an applicant’s gross monthly income (whatever is less). Some online lenders have expressed opposition to the current inconsistent requirements across the country. The short-term lending issue will likely garner further attention as the amount of loans issued continues to grow in states such as Oklahoma, according to

Opponents of the proposed legislation include some state regulators who see the bill as a means of diluting current regulations and oversights, according to Bloomberg News. Other critics claim short-term lenders cater to lower income consumers susceptible to being caught in a cycle of debt. The bill is the latest subject in a contentious debate over the merits of unsecured loans and the accompanying interest rates and fees.

The Pew Charitable Trusts estimates more than 12 million Americans rely on short-term, unsecured loans each year. Arguments concerning the total costs associated with these loan options highlight the divisive nature of the subject. Payday lending critics point to annual percentage rates as high as 391% when pushing for increased regulation. Supporters of short-term loans claim the annual percentage rates are an unrealistic means of calculating the total cost of the loan because they are supposed to be repaid within weeks, not over the course of a year.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Michael Harden
Visit website