Senators Aim Their Guns at Online Payday Lending

Three U.S. Senators recently introduced a bill that is designed to eliminate some of the most sinister practices of the online payday loan industry, while at the same time protecting those lenders that obey the law, and consumers. Garnering support from the National Consumer Law Center, the Center for Responsible Lending, and Consumer Federation of America, it is one of the first of its kind as the previously unchartered territory of online payday lending continues to grow.


The “Stopping Abuse and Fraud In Electronic (SAFE) Lending Act”  focusses on four main concepts to ensure that those lenders do not have such an easy time preying on desperate Americans who find themselves in the market for a payday loan on the Internet.


  • First, consumers will maintain control of their own bank accounts.   Currently, lenders can strip a bank account with the consumer being virtually defenseless.  This bill will put legislation into play that will allow customers to cancel debits related to small dollar amounts.  In addition, lenders will no longer be able to access accounts via remotely created checks.


  • This bill also creates a level playing field between small dollar loans and larger loans when it comes to usury laws.  Currently, there are plenty of loop holes that allow online payday lenders to escape usury standards and charge exorbitant interest rates.  This new legislation will dictate that all lenders, even banks, have to adhere to usury laws for small dollar loans as well.


  • There are many websites out there that claim to be payday lenders, when in actuality they are anonymously registered paid lead generators.  They take loan applications and auction them off to lenders.  The “SAFE Lending Act” bans paid lead generators and anonymously registered payday lending sites.


  • Lastly, the bill will crack down on those lenders using the Internet as a means to avoid legal action related to illegal payday lending.  Regulations are sketchy here, but off shore lending especially poses a threat when it comes to online lending.  The senators aim to put an end to that with the “SAFE Lending Act.”   The bill is structured so as not cause any negative impact on the Internet with these provisions.


Whether or not it will be passed remains to be seen, and then the effectiveness of the law can be judged.  It certainly seems to be a good start, however, to keep those law abiding lenders and unsuspecting borrowers safe.  It offers at least more protection than there is currently from those that would use the Internet to take advantage of others in desperate situations.

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