National Federation of Community Development Credit Unions Applauds State Leaders for Keeping Payday Lending Out of New York State
(May 7, 2013 – New York, NY)
Last week marked a significant victory for consumer advocates and low-income consumers when Governor Andrew Cuomo and Department of Financial Services (DFS) Superintendent Benjamin Lawsky opposed efforts by the check cashing industry to introduce high cost payday-type loans into the state’s financial services landscape with through the Short-term Financial Services Loan Act (Assembly Bill 1113-A).
“We applaud the Governor and Superintendent for their public opposition and ongoing efforts to protect New York’s consumers” said Cathie Mahon, President and CEO of the National Federation of Community Development Credit Unions. Advocacy work by the Federation, its credit union members and long-standing partners in the 150 strong New Yorkers for Responsible Lending (NYRL) coalition helped set the stage for the Governor’s public repudiation of the bill. New York State is one of 15 states that ban the loans.
In publicly opposing the so-called “check casher” bill, the Governor and Superintendent ensured that it would not pass. According to Ms. Mahon, “This represents an important victory for consumer advocacy groups who have long argued this bill would have opened the door to payday loans in New York—the types of short-term, small dollar loans with interest rates as high as 400%, that drain income from individuals and communities.”
On Monday, April 29th, Superintendent Lawsky released a strongly worded letter warning that the proposed check casher loans would amount to legalized usury. This was followed by the Governor’s Twitter announcement that “No loan sharks welcome in New York State,” destroying any chance that the bill would pass in 2013 or during the governor’s tenure.
In reintroducing this bill for the last five years, the sponsors, both Democrat and Republican, claimed that people of modest means need more access to credit, never divulging that the check cashers would be providing access to unaffordable credit and locking people into a cycle of high-cost borrowing.
During this same period, the Federation has worked to raise awareness of products that credit unions offer that responsibly meet the need for affordable small consumer loans. The Federation has supported credit union alternatives to payday loans with deposits (Predatory Relief and Intervention Deposits or PRIDEs) that transfer a portion of the risk associated with these loans to the Federation. The Federation has also spearheaded the development of programs that test how emergency loan programs can be linked to financial stabilization efforts, such as the “Borrow and Save” loan launched in 2011.
The 41 Community Development Credit Unions in New York have long led by example in the provision of safe and affordable loans, extending credit responsibly to low-income, undeserved and minority communities throughout New York State.
As Superintendent Lawsky noted in his letter, “Under the current consumer protection laws, consumers have access to short-term small-dollar emergency loans from credit unions and banks. These loans comply with the New York’s usury laws and the lenders carefully consider credit and income factors to ensure borrowers will be able to pay off loans in a reasonable time, ensuring consumers do not fall into spiraling debt.”