[Congressional Record Volume 162, Number 53 (Thursday, April 7, 2016)]
[Senate]
[Pages S1811-S1812]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MERKLEY (for himself, Mr. Udall, Mr. Sanders, Mr. Franken, 
        Mrs. Murray, Mr. Wyden, Mr. Durbin, Mr. Blumenthal, Ms. Warren, 
        Ms. Baldwin, Mr. Markey, Mr. Booker, and Mr. Heinrich):
  S. 2760. A bill to amend the Truth in Lending Act to address certain 
issues related to the extension of consumer credit, and for other 
purposes; to the Committee on Banking, Housing, and Urban Affairs.
  Mr. MERKLEY. Mr. President, an American historian, James Truslow 
Adams, wrote a book in 1931 entitled ``The Epic of America,'' and in 
this book he coined the term the ``American dream.'' He went on to say 
this: ``Ever since we have become an independent nation, each 
generation has seen an uprising of the ordinary Americans to save that 
dream from the forces which appeared to be overwhelming and dispelling 
it.''
  One of those forces that has been overwhelming the effort of middle-
class, hard-working Americans to be successful is predatory lending. 
Today I am specifically rising to discuss the introduction of the SAFE 
Lending Act. SAFE stands for stopping abuse and fraud in electronic 
lending.
  The focus of this is short-term, high-interest loans, often referred 
to as ``payday'' loans. These loans often have interest rates of 300 
percent, 400 percent, 500 percent. The debt a family has with one of 
those loans just grows and grows and grows. Consider this: If you take 
out $1,000 today, a year from now, at 500 percent interest, you owe 
$5,000. In 2 years you owe $25,000--an impossible sum for a family of 
modest means. So these payday loans pull families into a vortex of debt 
from which they cannot escape, and this vortex destroys them 
financially. These are huge consequences for the parents, certainly, 
but huge consequences for the children. It does a tremendous amount of 
damage to American families. This is why many major religions in the 
world have come out over time--over thousands a year--and said high-
interest lending destroys and shouldn't be done, but here we have it, 
right here in America.
  Many States, including my State of Oregon, have worked to end this 
vortex of debt. They have put a cap on the interest rate. They have 
stopped the every-2-week rollovers, and so they have returned, if you 
will, small-dollar lending to being an affordable instrument that 
doesn't destroy families. These tough State laws are under assault by 
new tactics of the payday loan industry, and we need to address those 
new tactics.
  Specifically, the industry is starting to use an instrument called 
remotely created checks. How does this work? Let's say you have your 
bank account and you take out a payday loan. The dollars are put into 
your bank account, and you think they are going to stay there, but now 
this online payday loan company--and who knows where in the world these 
people really are; they may be overseas in any remote location, 
extremely difficult to find, extremely difficult to enforce our laws--
has your bank account number, and that is all they need to write a 
check to themselves to withdraw the money from your account and put it 
in their account, an account that is likely to be so remotely located 
no one can enforce the State laws.
  In other words--let me say this again--the payday lender, once they 
have your checking account number, can reach into your account without 
your permission and take your money out; thereby, having the ability to 
bypass the State laws. An Oregon law may say if you have interest rates 
over those established by Oregon law your loan is uncollectible; that 
it is illegal

[[Page S1812]]

in our State. Well, these online predatory payday lenders do not care 
that it is illegal in Oregon. They have your account number, and they 
are going to reach in and take your money illegally.
  That is not the only predatory practice that is evolving. These 
payday loan companies have also established a practice whereby instead 
of putting money into your bank account, they give you a prepaid card. 
This prepaid card looks very convenient. You use it like a credit card, 
a debit card, and we are familiar with that in America, but here is the 
ringer. They put fees on these cards that add to the 300-percent, 400-
percent, or 500-percent interest rate that is already destroying 
families, particularly over balance fees.
  You may not know whether your card has $20 or $30 or $50 left on it. 
Some of these prepaid cards, in other parts of the financial industry, 
charge for all kinds of things. They charge you to call and ask what 
your balance is. They charge if you call and ask a question about how 
the card works or even what the fees are. They charge a fee just for 
asking what the fees are. Some of them charge a fee every time you use 
the card. Some might charge an additional monthly fee, but particularly 
these prepaid payday loan cards are notorious for their overbalance 
fees.
  Let us assume you have perhaps $50 left in your account, you buy 
something for $52, and maybe immediately you get charged a $35 fee, 
which they can reach into your account and take, but then that is an 
overdraft fee on the bank, so the bank is now charging you a fee. Then, 
because you don't know it is an overdraft because they didn't turn down 
the transaction, you buy a pack of gum for 50 cents, and there is 
another $35 fee. You buy a hamburger at Burger King for lunch, and 
there is another fee. So you can see how these predatory fees line up 
very quickly on top of the 300-percent, 400-percent, or 500-percent 
interest rates.
  So here is the thing. State after State has said these are destroying 
families and we are going to act. In fact, in the U.S. Senate years ago 
we acted to protect military families from these predatory loans. The 
admirals and generals came to Capitol Hill to testify. They said: At 
our military bases these predatory payday loans are destroying our 
military families, and it is not just their finances. When their 
finances are destroyed, relationships are frayed, children's 
opportunities are damaged. We cannot have this type of terrible impact 
on our military families. So we established a national cap of interest 
on these short-term loans.
  It is good we did. It is good we protected our military families from 
these abusive, destructive practices, but if these practices are so 
damaging to families in the military, aren't they equally damaging to 
families who are not in the military? Shouldn't we apply the same 
protection to every American family we apply to a military family? 
Don't we value the success of every American family more than we value 
protection for legalized loan sharking? Certainly we should, in this 
Chamber, extend to all families in America the same protection we gave 
to military families. Until we do that, we should at least make sure 
the Federal framework requires honoring the tough laws passed by State 
after State after State to stop these practices. I think the total is 
about 19 States at this point.
  That is why I introduced the SAFE Lending Act today. The SAFE Lending 
Act--stop the abuse and fraud in electronic lending. This act does a 
couple of key things. First of all, it says these remotely created 
checks in which a company reaches in and takes your money without your 
permission--those are banned. You regain control of your checking 
account. Second, the legislation bans the overdraft fees on these 
prepaid payday loan cards and other predatory fees established through 
the Commission. Third, it says that all small-dollar lenders have to 
register in order to be monitored by their States so they are not in an 
unregulated world out there without people even knowing they exist. 
Furthermore, it says that every lender of every type has to abide by 
the State laws. It doesn't matter whom they are regulated by. Finally, 
it bans lead generators.
  Now, what is a lead generator? A lead generator is a fake Web site 
that pretends it is a payday loan company, offers you a product, and 
their whole goal is to get your bank account number. Again, once they 
have that bank account number, they can reach in and take funds out of 
your account. It is incredible that this is true; that you don't have 
to sign the check. They basically just use your number and ask to take 
away the money from John Consumer or Jane Consumer and give it to us, 
and the bank complies and does it. As amazing as that sounds, that is 
the way the banking system works. That is what these remotely created 
checks do.
  So we to make sure that regardless of what your financial regulator 
is, you have to abide by the State rules, and we ban these lead 
generators that are fishing for these bank account numbers. Once they 
have them, they sell them to the lending industry, to the payday loan 
industry, and who knows what other hands these numbers end up in.
  I was surprised a couple of years ago when I noticed a charge on my 
bank account that wasn't something that either my wife Mary or I had 
purchased from a store we don't go to. I looked at it carefully and 
discovered the number of the check was out of the order of my 
checkbook. So I pulled up the copy of the check on the computer, 
looking through my account on the computer, and I could see the number 
matched my account, but the name on the check didn't match my account, 
the address didn't match my account, and the signature didn't match my 
signature. None of it matched. The only thing on this check was the 
number of the bank account that matched my bank account, and that is 
all that is required for someone to reach in and take money out of your 
account.
  That type of fraud is surprising as well, but it reinforces the point 
that once an online electronic payday loan company has your number, 
they can reach in. That is all they need to take the money out of your 
account. So we are going to ban these lead generators as another piece 
of this predatory profile of the electronic payday loan industry. It is 
why I am introducing the act.
  I greatly appreciate my cosponsors on this act, and I would like to 
thank them all. They are Senator Tom Udall, Senator Bernie Sanders, 
Senator Patty Murray, Senator Dick Durbin, Senator Dick Blumenthal, 
Senator Elizabeth Warren, Senator Tammy Baldwin, Senator Ed Markey, 
Senator Ron Wyden, and Senator Cory Booker. Thank you to all of my 
colleagues who care a lot about ending predatory financial transactions 
that strip billions of dollars out of hard-working Americans' accounts.
  We have a lot of work to do on this. We have accomplished some. There 
is much more to be done. Certainly, when James Truslow Adams said that 
individuals of each generation will have to stand and fight against 
practices designed to destroy the American dream, he was talking about 
things such as this--practices that proceed to undermine the success of 
America's working families. Let us stop those predatory practices in 
their tracks and pass the SAFE Lending Act.
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