- - Thursday, September 3, 2015

Not everyone has the luxury of going to the bank and getting a loan when they need extra cash. Working Floridians, for example, have just as much chance as everyone else of getting a toothache or needing emergency car repairs, but many face these challenges without a savings cushion to cover the cost.

Sometimes people need a little extra cash to help get them get over a financial speed bump until the next paycheck arrives. One temporary solution is short-term loans, often referred to as payday loans. The state of Florida wisely established a regulatory scheme that keeps these loans available while imposing appropriate regulations to make sure consumers are protected.

Florida’s approach has been working well for more than a decade, helping more than 3 million consumers per year get through times of need. But now a federal agency is considering unnecessarily restrictive rules that would all but eliminate short-terms loans as an effective resource for Floridians and the rest of the nation.

In my work with the Urban League, I have come to understand how so many of our neighbors struggle to make ends meet. It’s important for them to have ready access to cash from a safe, reliable and legal source. Payday loans are only a short-term fix at best, but they are an effective tool when needed.

The rules proposed by the federal Consumer Financial Protection Bureau have targeted the lending industry, fueled by critics who claim payday loans are predatory. Abuses have indeed occurred in the past – that’s why Florida adopted its effective regulations a decade ago. But countless upstanding short-term lenders play by the rules to provide an essential service to their customers.

The problem with the proposed federal rules is that they go far overboard in an attempt to guarantee consumer protection, to the point of actually harming consumers by depriving them of a needed service. Analysts say that the proposed new rules could reduce the availability of short-term loans by up to 70 percent. As a result, the change could produce the unintended consequence of redlining the very minority communities that rely on well-regulated short-term credit.

Florida’s regulations, on the other hand, ensure that consumers know exactly what they are getting, and what the cost will be, when they take out a short-term loan. The rules prohibit having multiple payday loans at the same time, preventing borrowers from getting mired in short-term debt. They require a 24-hour “cooling off” period between these loans, and they provide a 60-day grace period if customers want to complete consumer credit counseling.

The Consumer Financial Protection Bureau is to be commended for attempting to protect consumers. But its excessive, untested proposals will do far more harm than good, greatly increasing the odds that low-income Americans will have few options but to turn to predatory loan sharks and other questionable sources.

Florida’s effective regulations would be a much better standard for the nation. Such esteemed authorities as our state’s congressional delegation, the commissioner of the Florida Office of Financial Regulation and the Florida Alliance for Consumer Protection agree, and have urged the federal agency to use Florida’s system as its model.

Working Americans need a dependable place they can turn to when they need short-term cash to help them through an emergency. Florida makes sure that option exists, and the federal government should look to the Sunshine State as it develops a national approach.

Germaine Smith-Baugh is the CEO of the Urban League of Brower County.

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