Bill Overview
Title: SAFE Lending Act of 2022
Description: This bill revises requirements related to consumer financial protection and small-dollar lending, including matters concerning remotely created checks, electronic fund transfers, registration of small-dollar lenders, overdraft fees, and the collection of personal information. Under the bill, remotely created checks may only be issued by a person specifically designated in writing by a consumer and provided to the consumer's depository institution. (A remotely created check is a check not issued by the bank and not signed by the account owner.) A voluntary agreement to repay a small-dollar consumer credit transaction by an electronic fund transfer is subject to certain protections, including the right of the consumer to stop payment. Small-dollar consumer credit providers must register with the Consumer Financial Protection Bureau. Any small-dollar consumer credit transaction is subject to the laws of the state in which the consumer resides. The bill also prohibits overdraft fees on prepaid accounts.
Sponsors: Rep. Bonamici, Suzanne [D-OR-1]
Target Audience
Population: People using small-dollar lending services
Estimated Size: 15000000
- The bill impacts consumers who utilize small-dollar lending services, as it includes provisions for consumer financial protection in this sector.
- Small-dollar lending services often target individuals with limited access to credit, who may rely on these services to meet short-term financial needs.
- The inclusion of overdraft fee prohibitions on prepaid accounts affects cardholders who use prepaid debit cards.
- Prepaid cards are frequently used by unbanked or underbanked individuals who may not have access to traditional banking services.
- The requirement for small-dollar credit providers to register and adhere to state laws affects individuals in states with varying consumer protection laws.
Reasoning
- The population impacted by the SAFE Lending Act of 2022 mainly consists of individuals using small-dollar lending services, which include payday loans and similar financial products. Many of these individuals often resort to high-interest lending between paychecks or for emergencies due to insufficient credit scores or lack of access to traditional banking.
- According to data, about 5% of adult Americans potentially engage with such lending services, this is approximately 15 million individuals out of the national estimation. This group also includes individuals who are unbanked or underbanked, heavily relying on prepaid cards.
- The policy introduces regulations that safeguard these individuals by prohibiting overdraft fees on prepaid accounts and instituting standard regulations across states through the Consumer Financial Protection Bureau.
- Given its target population of about 15 million and a budget over the years, the policy needs to efficiently utilize funding to ensure substantive impacts and suitable regulation, thus requiring conscious estimating of wellbeing improvements over years.
- To simulate varied responses, we aim to include perspectives from individuals drastically impacted due to frequent use of such services, to those minimally affected due to secure financial statuses. We'll also include viewpoints from service providers to reflect the broader picture.
Simulated Interviews
Retail cashier (Jackson, MS)
Age: 28 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- I often feel trapped by payday loans, but I need them when unexpected expenses come up.
- It's frustrating to pay additional fees on my prepaid card when I have no other options.
- This policy could help reduce the financial strain on my budget.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 7 | 4 |
| Year 5 | 7 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 8 | 6 |
Self-employed contractor (Los Angeles, CA)
Age: 50 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- High fees on small loans chip away at my earnings. I welcome tighter regulation.
- Having the ability to stop payments could prevent some poor financial decisions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 5 |
Freelance writer (New York, NY)
Age: 35 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 12/20
Statement of Opinion:
- I try to avoid small loans due to high fees, but it's good to know they are being regulated.
- The policy's impact on prepaid accounts is beneficial, though I seldom face overdrafts.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Food truck owner (Chicago, IL)
Age: 42 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 8.0 years
Commonness: 8/20
Statement of Opinion:
- Regulation is good, but I hope it doesn't make accessing funds more complicated.
- Fees are too high for small needs, which squeezes my business cash flow.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 7 |
College student (Austin, TX)
Age: 23 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 14/20
Statement of Opinion:
- It's good that this policy stops some unfair practices, though I personally avoid these lending services.
- Overdraft fees can be a surprise, so removing them is a relief.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Service worker (Miami, FL)
Age: 30 | Gender: male
Wellbeing Before Policy: 3
Duration of Impact: 20.0 years
Commonness: 6/20
Statement of Opinion:
- The burden of high fees limits my financial recovery each month.
- I hope this policy makes small loans safer for people like me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 3 |
| Year 2 | 7 | 3 |
| Year 3 | 8 | 4 |
| Year 5 | 8 | 5 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
Retired (Orlando, FL)
Age: 60 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 10.0 years
Commonness: 11/20
Statement of Opinion:
- Regulation will protect vulnerable consumers who are misled by tricky lending terms.
- No overdraft surprises will ease my stress slightly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 7 | 4 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 5 |
Small business owner (Boise, ID)
Age: 40 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 16/20
Statement of Opinion:
- While I generally avoid small-dollar loans, improving their safety can benefit the economy.
- Regulations should not limit my current flexibility in fund transfers.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Factory worker (Detroit, MI)
Age: 37 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 9/20
Statement of Opinion:
- Stopping overdraft fees will help my budget be more predictable.
- When I rely on paycheck advances, it’s hard to get out of debt.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 5 |
Part-time nurse (Seattle, WA)
Age: 45 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 1.0 years
Commonness: 13/20
Statement of Opinion:
- I manage without payday loans, but it’s reassuring to know about these safeguards.
- Safety in financial transactions is definitely good for the community.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Cost Estimates
Year 1: $400000000 (Low: $300000000, High: $500000000)
Year 2: $420000000 (Low: $310000000, High: $530000000)
Year 3: $440000000 (Low: $320000000, High: $560000000)
Year 5: $480000000 (Low: $350000000, High: $610000000)
Year 10: $550000000 (Low: $400000000, High: $700000000)
Year 100: $1000000000 (Low: $700000000, High: $1200000000)
Key Considerations
- The need for balanced regulations to ensure both consumer protection and the viability of small-dollar lenders.
- Monitoring technological and market changes that may impact the effectiveness and relevance of the regulations.
- Engaging with stakeholders to adjust regulations based on changing economic contexts.