Payday Lenders employ shady tactics at statehouse

In Face of Growing Support for Payday Loan Reform, Predatory Lending Industry Tries to Fast Track Legislation Pushing More Debt onto Iowa Families


As the first legislative funnel deadline for bills approaches, payday lenders are trying to fast track a bill that on its face sounds like an affordable lending option, but upon closer inspection is anything but. “Flexible Credit Loans” are marketed as affordable payday alternative – but fees, loan terms, and a lack of transparency show otherwise.


HSB 628 passed a House sub-committee chaired by Rep. Dawn Pettengill on February 17 and must be considered by the House Commerce committee by February 19 if it is to survive the “funnel” deadline for legislation to be considered alive this session. HSB 628 would open up Iowa to Flexible Credit Loans, also known as “Flex Loans”.


Flex Loans are unsecured lines of credit that are capped at 24% – a month. Unlike traditional payday loans that cannot exceed $500, Flex Loans would range from $500 – $5,000 with loan terms ranging from 6 – 24 months. If the 24% interest rate isn’t compounded monthly, the Annual Percentage Rate (APR) of interest reaches nearly 300%. If compounded, it exceeds 1,200% APR.


This isn’t just a payday loan by another name, it’s payday lending on steroids. The way the loan is structured makes it ripe for abuse with questionable fees, shady refinancing schemes, and so much more to trap families in a debt cycle for years.


CCI Action Fund and several other community and faith organizations have been pushing for payday loan reform that ends the cycle of debt at the Iowa statehouse. Additionally, the Consumer Financial Protection Bureau is poised to release draft rules on the payday and installment loan industries soon to crack down on some of the worst abuses by these lenders.


In face of growing opposition to payday lending and state and federal efforts to regulate these predatory lending products, the industry is going on the offense and introducing legislation in states like Iowa, Arizona, Tennessee and others to expand their reach under a different name.


The Center for Responsible Lending released a brief on the rise of installment or “Flex Loans” and the dangers associated with such products that can be viewed here. And, there has been recent news coverage in Tennessee about the rise of “Flex Loans” and how they exacerbate the debt cycle which can be found here.



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