The chairs of Mississippi’s legislative committees with jurisdiction over payday loans concede the state’s 2012 Check Cashing Act may need some repairs. But with the federal government set to take control of payday lending rules, doing the fixes now could be a waste of time, they say.
“I’m waiting to see what they do,” said House Finance Committee Chairman Henry Zuber III, referring to the Consumer Financial Protection Bureau, a three-year-old watchdog agency created by the Dodd Frank Wall Reform and Consumer Protection Act.
Sen. Gary Jackson, chairman of the Senate Business and Financial Institutions Committee, said he expects the federal bureau “will take a fairly strong stance in the near future,” perhaps as early as November.
Zuber and Jackson say the CFPB’s rules will be so sweeping that states will be left largely to decide whether to allow payday lending and set caps on fees short-term lenders charge borrowers.
Of particular concern to consumer advocacy groups is a provision in Mississippi’s 2012 Checking Cashing Act that established two tiers of loans, the first tier applying to loans of $250 or below and the other to loans that when combined with fees do not exceed $500. The lower tier allows a 14-day repayment period and the second a 30-day one.
Payday lenders, including one under investigation by the Mississippi Department of Banking and Consumer Finance, have been able to lend the higher second-tier amount and apply a 14-day loan period by issuing more than one first-tier loan at a time.
Drafters of the 2012 law did not anticipate this practice, according to Jackson. The law intended to limit the borrower to a single tier-one loan, “not several of those” at the same time, he said.
Attorney General Jim Hood said otherwise in a 2012 opinion, though Hood conceded the practice would seem to “circumvent the new statutory limits.”
“The way the law was interpreted, we might as well have not done anything,” Jackson said.
But with the CFPB likely to enact new enforcement rules before the end of the year and the Legislature not convening until January, applying fixes “would be redundant,” he added.
Paheadra Robinson, a lawyer and director of consumer protection for the Mississippi Center for Justice, said it is a “cop-out” for legislators to put off a fix in anticipation of the Consumer Financial Protection Bureau making one.
“They are saying they can’t do anything for the people who are being fleeced. That is unacceptable,” she said.
The Center for Justice expects it will be at least six months before the CFPB initiates new rules.
When the CFPB does act, the measures are likely to be stringent, however.