As an African-American growing up in the Liberty City section of Miami-Dade County, I saw many families endure financial hardship from time to time. Unfortunately, many of these families, when left with no other options, turned to dubious methods and sources for help getting over these temporary challenges. As often as not, the “solution” was worse than the problem.
I was fortunate. My family, led by an incredible woman who went on to represent our community in Congress, avoided these questionable paths. But the experience reinforced the need for everyone, regardless of their current credit status, to have dignified solutions to the natural bumps in the road that come up from time to time.
That’s why, when I became a member of the Florida Legislature, I worked hard to ensure that safe, dependable sources of short-term loans would be available throughout our state. Florida had been suffering through a period of predatory payday lenders, so in 2001 my colleagues and I enacted historic reforms that are still working effectively to protect consumers. In Florida, well-regulated short-term lenders (also known as payday lenders) continue to provide a vital financial product that meets a need for millions of people every year.
Now, the federal Consumer Financial Protection Bureau is trying to adopt a new rule that could put 70 percent of payday lenders out of business. A decision of this magnitude would have ripple effects harming millions of Americans across the country.
Hardworking Floridians could easily find themselves needing the resources of a short-term lender. Fortunately for them, Florida’s regulatory framework features numerous safeguards to successfully protect consumers, including a $500 limit per loan and a statewide database to ensure that each borrower has just one outstanding short-term loan at a time. Rollover of a loan is prohibited, and the lender — rather than the borrower — is responsible for paying for credit counseling if the consumer needs to work out a repayment solution to satisfy the loan within 12 months.
Many Americans still live paycheck-to-paycheck to make ends meet, and sometimes they face unexpected expenses or cash shortfalls before their next paycheck. For those who don’t have the option of getting a bank or credit union loan, a payday loan represents a far better — and far more affordable — option than bouncing a check or accumulating past-due fees. In my home state, a $100 short-term loan carries a fee of just $10, while a single bounced-check fee can cost three times as much.
For more than a decade, Florida’s regulatory system has effectively provided a happy medium balancing consumer protection with the need for short-term cash, and the federal government would be wise to adopt our process as a national model. Even Florida’s delegation in the U.S. House, which rarely agrees on anything, is all but unanimous in supporting Florida’s short-term loan model. They are joined by numerous other prominent organizations, including the National Urban League and 100 Black Men of America, in support of using Florida’s proven model as a workable option for the nation.
We are left with one simple question: Why would the federal government want to enact a rule pre-empting the Florida law, when Florida’s system has been shown to work so well?
We must make sure the people of our communities continue to have access to short-term cash when they need it. Florida’s groundbreaking reform of short-term lending has provided a safe solution for millions of people for a decade and a half, and I believe it can and should serve as an effective model for any national regulations.
• Kendrick Meek is a former U.S. Representative who represented Florida’s 17th Congressional District from 2003 to 2011. He previously served in the Florida House of Representatives from 1995 to 1998 and Florida Senate from 1998 to 2002.