Jane Daugherty: GOP lawmakers criticize crackdown on lenders

A harshly worded letter criticizing a federal crackdown on online lenders who serve “tens of millions of low-income Americans” likely will land on the desks of Attorney General Eric Holder and Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation (FDIC).

Without mentioning the 16 online Indian-owned companies targeted as part of a cease and desist order to stop online loans by the state of New York earlier this month, the letter, dated Aug. 22 and signed by 31 members of Congress, demands that the government crackdown stop.

Citing harm to the poorest Americans – the usual customers of the online loans because banks and other financial institutions will not grant them loans or credit cards -- the letter sharply criticized recent federal actions.

The Congress members, all Republicans, called the shutdown efforts “intimidating” and harmful to low-income American households that live “paycheck to paycheck.” The letter said that most people who resort to the online loans have no other short-term lending sources in emergencies. The letter raised the specter of illegal loan sharks preying on the poor, saying shutting down online lenders “could force them (online borrowers) to unregulated and unsafe alternatives that are much more expensive.”