Online Lenders Alliance Statement on Garcia-Grothman Legislation to Eliminate Consumer Credit Choices

WASHINGTON, DC (November 12, 2019) — Following the news that Rep. Jesus “Chuy” Garcia (D-IL) and Rep. Glen Grothman (R-WI) introduced legislation that would eliminate safe access to credit for millions of Americans and make it harder for non-prime consumers to find loans, Online Lenders Alliance CEO Mary Jackson issued the following statement:

“It’s disappointing that Reps. Garcia and Grothman would use the sacrifice and dedication of America’s veterans as political cover for their legislation to eliminate credit options for people who need safe and reliable access to loans. Many Americans who lack prime credit scores depend on safe, regulated, short-term credit products to avoid bouncing checks, skipping bill payments, or otherwise falling behind—all of which can lead to drastic outcomes.

An honest reckoning of the Military Lending Act (MLA) shows the MLA has increased financial insecurity among service members resulting in depletion of savings, dependency on relief society or family for money, and leaving bills unpaid according to the DOD report “Report: Enhancement of Protections on Consumer Credit for Members of the Armed Forces and Their Dependents” from April 2014. The 2018 Blue Star Families “Military Family Lifestyles Survey” report found that Financial Issues/Stress was the top stressor among Active Duty Members, Veterans, and their spouses echoing the DoD finding that reducing access to credit doesn’t increase financial wellness. Reps. Garcia and Grothman will leave 100 million Americans with the same problem the overly restrictive MLA caused for military members according to the DoD report – they will be much less likely to be able to cover “one or more unexpected essential expenses.”

According to a Harris Poll conducted earlier this year, the number of active servicemembers paying their bills on time has declined from 83 percent in 2014 to 63 percent today. In addition, active servicemembers who say they currently have debts in collection has nearly quadrupled, rising from 3 percent in 2014 to 11 percent today. Clearly, the MLA is not achieving its intended goals, and it would be unwise to force these unintended consequences onto American consumers at large.

OLA and its members support good regulations based on facts and market realities. Licensed lenders in the U.S. comply with 19 Federal laws designed to prevent predatory lending practices that are fraudulent or deceptive. Lenders use new data sources and advanced analytics to evaluate ability to repay loans and price loans according to risk. Over the last decade, the short term, balloon payment loan has largely been replaced by credit products providing multiple, amortizing payments over several months, installment loans and lines of credit with disclosed rates and fees.

People need access to safe, regulated credit that can help get them build a strong credit history or get through financial challenges, allowing them to move forward in their financial life. The Garcia-Grothman legislation eliminates these options, voids their credit choices, and sets them back, forcing working people to bounce checks, miss payments, or go without essentials.

For these reasons, we vigorously oppose this legislation and encourage the Congress to follow suit.”

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