In addition to building a social safety net that helps Washingtonians living on a low income meet their basic needs, we are working to help families keep money in their pockets by bolstering consumer protections. Predatory lending is a persistent threat to the material well-being of millions of Washingtonians. The economic hardship of the last four years has worsened this threat, forcing many to use credit to meet short term obligations like rent, groceries, and utility payments. People shouldn’t have to go into debt to put food on the table.
Payday lenders intentionally target marginalized communities to market their loans to struggling households. The promise of quick money is swiftly dashed by the reality of high-interest rates and debt folks cannot repay with the income they have. Payday loan creditors are most common in poorer communities, taking away wages and locking people in a cycle of debt.
One form predatory lending takes is Home Equity Sharing Agreements (HESA). HESAs are unregulated, deceptive, and predatory contracts disguised as a contract between a homeowner and an investor in which the homeowner receives a sum of money upfront in exchange for a share of their home equity. These agreements mislead consumers into thinking they are taking out a loan, rather than selling their home equity. Homeowners find themselves trapped in a downward spiral that often results in bankruptcy, foreclosure and eviction.
“Debt Sucks. I just hang up on the debt collectors. I have to take school loans out because I don’t make enough money. As much as I’m trying to get ahead, I’m really not. I’m basically robbing Peter to pay Paul just to survive.”Spokane Listening Session Attendee
For people working hard to make ends meet, it’s hard enough to stay hopeful without the crushing weight of debt on your shoulders and missed calls from collectors filling your voicemail box. We need to keep a pathway out of poverty open for our state’s low-income residents and to protect everyone from predatory lending practices.
Additionally, large corporations are taking advantage of a loophole in Washington’s gift card law to retain hundreds of millions of dollars in unspent gift cards that would be state revenue for infrastructure, schools, housing, and more in other states. These same companies have policies that make it harder to use the full value of gift cards, guaranteeing that they retain profits from unused gift cards. Our state’s consumer protections should keep up with the standards set by other states and allow consumers to get the full value of gift cards – either in their pockets or by unclaimed gift cards funding public infrastructure instead of corporate profits.
What We’re Doing About It
Capping payday loan interest rates, as several other states do, at 36%.
Ensuring unclaimed gift cards are transferred to the state as unclaimed property, then to the state as revenue, instead of padding corporate profits.
Allowing consumers to cash out gift cards under $50, combine gift cards with other forms of payment to maximize their use, and prevent companies from setting minimum reloading amounts to gift cards.
Restrict abusive contract terms and lending practices by bringing HESA contracts under the definition of a mortgage loan. This would ensure the same protections as traditional mortgages and thus regulation by the Department of Financial Institutions.
- Keep a pathway out of poverty open for Washingtonians living on a low income.
- Protect Washingtonians from predatory lending practices.
- Prioritize the needs of everyday people above corporate profits.