Urban News Staff Reports
National Urban League President and CEO Marc H. Morial called on the federal government to reject efforts by predatory payday lenders to gain access to funding intended for legitimate and socially-responsible small businesses through the Paycheck Protection Program (PPP).
“At a time when our nation’s minority-owned businesses—many of which were unable to access PPP funding in the first round—continue to report facing barriers accessing the necessary capital they need to pay workers and sustain their businesses, it is absolutely vital that the Treasury Department and Small Business Administration ensure that the fair and stable lending resources authorized by Congress through the PPP program will be directed only to entities that serve as responsible stewards of their communities, not companies that seek to prey on our society’s most financially vulnerable citizens by trapping them into long and irreversible cycles of debt,” Morial wrote in a letter to U.S. Treasury Secretary Steve Mnuchin and SBA Administrator Jovita Carranza.
Morial urged the agencies to issue guidance clarifying that predatory lenders, including payday and car-title lenders, will not be allowed access to PPP funds.
“Short-term payday loans trap consumers in high interest debt for long periods of time that can result in serious financial harm, including increased likelihood of bankruptcy,” Morial wrote, noting that nearly 12 million Americans use payday loans each year, incurring over $8 billion in fees, the vast majority from consumers who have been forced to take out more than 10 loans in a given year just to repay their original loan.
With average interest rates exceeding 300 percent, the majority of payday loans are renewed so many times that borrowers end up paying more in fees than the amount they originally borrowed.
“This predatory business model is predicated on exploiting the financial hardships facing hard-working American families by trapping them into long-term debt cycles,” Morial wrote.
“Given the dire health and economic circumstances facing our country as a direct result of COVID-19 pandemic, rejecting efforts by predatory lenders to access the PPP program would help assure our nation’s struggling small business owners the Treasury and SBA stand ready to help them recover financially from a crisis that was not of their doing and to ensure that our financial markets are safe.”