Safe Lending Act Focused on Online Payday Lenders

In a bill that seeks to reduce the most deceptive and exploitative practices used by the industry, as well as give authorities the ability to enforce existing rules to protect consumers, three U.S. Senators, including Oregon’s Senator, Jeff Merkley, Senator, Tom Udall (D-NM), and Senator, Dick Durbin (D-IL), recently proposed a piece of legislation known as Stopping Abuse and Fraud in Electronic (“SAFE”) Lending Act. As an amendment to the Federal Truth in Lending Act that protects consumers in their dealings with creditors and lenders, the aim of the proposed legislation is to ensure that consumers have control of their own bank accounts. The bill seeks to close loopholes in order to create a level playing field in state usury law enforcement and also bans anonymous payday lending and lead generators. Lastly, it stops offshore online payday lenders that are violating state and other consumer lending laws through the Internet but could otherwise avoid enforcement. Online payday loans are marketed through email, online search, paid ads, and referrals. Typically, a consumer fills out an online application form or faxes a completed application that requests personal information, bank account numbers, Social Security Numbers and employer information. Borrowers fax copies of a check, a recent bank statement, and signed paperwork. The loan is then directly deposited into the borrower's checking account.