Their view: Legislation aims to curb predatory lending

Tuesday, Sen. Tom Udall, D-N.M., and two other senators introduced the Stopping Abuse and Fraud in Electronic Lending Act. The SAFE Lending Act would crack down on the worst practices of the online payday lending industry and give states more power to enforce already-existing rules to protect consumers from predatory loans.

"Too often, families who turn to payday lending fall victim to deceitful practices that make it harder for them to make ends meet. With payday lending moving online, the opportunities for abuse are growing," said Udall. "We owe it to those who earn an honest paycheck to ensure they are protected online just as they are in many of our states, like New Mexico."

Many of these short-term payday loans involve exploding interest rates, eventually accruing interest of 500 percent or higher. While many states have passed legislation to limit abusive lending, these efforts have been subverted by the growing online presence of payday lenders.

The Lending Act has four main concepts:

z Ensures that consumers have control of their own bank accounts and that a third party doesn't gain control of a consumer's account through remotely created checks, which are checks from a consumer's bank account created by third parties. It also allows consumers to cancel a debit (just like they can cancel a check) in connection with a small-dollar loan. This would prevent an Internet payday lender from stripping a checking account without a consumer being able to stop it.

z Closes loopholes and creates a level playing field in state usury law enforcement by requiring all lenders, including banks, to abide by state rules for the small-dollar, payday-like loans they may offer customers in a state.

z Bans lead generators and anonymous payday lending

Some websites describe themselves as payday lenders but actually "lead generators" that collect applications and auction them to payday lenders and others.

z Stops offshore and other rogue online payday lending in violation of state law by giving the Consumer Financial Protection Bureau authority to shut down payment processing for lenders that are violating state and other consumer lending laws through the Internet but could otherwise avoid enforcement.

Carefully constructed not to negatively impact the Internet.