Online Lenders Look to Shake Payday Name
Online Lenders look to shake Payday Name
Hoping to deflect some scrutiny and escape state regulation in favor of federal oversight, online short-term lenders have started pouring dollars into lobbying and political contributions.
Presently, despite a new bill to create an indipendent nation-wide charter only for payday loan lenders, all short-term lenders are restricted by the state laws in which they operate and policed by the new Consumer Financial Protections Bureau.
The online lending industry is hoping to influence Congress into transfering oversight from the patchwork system of state laws and the CFPB, to the Office of the Comptroller of the Currency within the U.S. Treasury Department.
The OCC is admittedly not so fond of the idea, but the final decision will ultimately be made by a committee within the House of Representatives.
The second phase of this aggressive plan by online lenders -- apart from applying pressure on Capitol Hill – is to distance themselves from the term ‘payday loan’. The thinking behind this two-pronged approach is to distance themselves from storefront lenders, and therefore the need to be regulated by local laws.
A spokesperson for Cash America, who has doubled their usual campaign contributions this year, argued that the online marketplace is dominated by foreign companies and sites affiliated with Native American tribes, who are not subject to strict state laws. On the otherhand, online lenders based in the U.S. are hamstrung by these state laws, and are at a significant disadvantage and finding it hard to compete. So in their opinion, online lenders should be held to different rules that reflect their competition.
Payday loans and online loans are in fact very different. While payday loans are offered at a traditional neighborhood store, and backed with a post-dated check signed by the customer, online loans are made dirrectly into a bank account.
Online loans made up 35% of all short-term loans made during 2010, and that percentage will grow to 65% by 2016. Online lenders are a powerful group within the industry, and they want the recognition.