Payday/High-cost Loans

CFPB Moves to Protect Predatory Payday Lenders

Federal Proposal Plans to Gut Debt-Trap Rules

Washington D.C. Today, the Consumer Financial Protection Bureau (CFPB) proposed new rules that would repeal the CFPB’s current rules on payday loans, car-title loans, and similar forms of credit.

Last October, the CFPB finalized a rule on Payday, Vehicle Title, and Certain High-Cost Installment Loans. Under the rule, creditors offering payday loans, and similar forms of credit, would be required to determine whether borrowers could afford loan payments while meeting their other expenses. Payday lenders were required to comply with these protections, which were the product of years of study, analysis and public comment, by August 19, 2019.

With new leadership in place at the CFPB, the agency is now signaling its intentions to reverse course.

Christopher Peterson, CFA’s Director of Financial Services and the John J. Flynn Endowed Professor of Law at the University of Utah, outlined the following concerns:

“While not perfect, the CFPB’s final payday lending rule was a giant step toward helping struggling families avoid debt traps. The regulation would have simply required that payday lenders consider whether loan applicants could afford their loan before extending credit.

Less than a day after calling for compromise and unity in his State of the Union address, President Trump’s consumer protection agency is proposing to eliminate rules, arrived at by compromise, which would protect struggling consumers from triple-digit interest loan traps.

A super-majority of Americans, both Republicans and Democrats, support an interest rate limit of 36 percent. Instead, of siding with the public, or even the CFPB’s compromise rules, President Trump’s consumer protection agency is working hand-in-hand with the usurious money changers that trap consumers in an endless, and devastating, debt cycle.

Payday loans have average interest rates of about 400 percent. By way of comparison, New York City loan sharking syndicates typically charged interest rates of 250 percent in the 1960s. The CFPB, itself, found that a majority of short-term payday loan victims are typically trapped in at least 10 loans in a row—paying far, far more in fees than they received in credit.

The CFPB was supposed to protect consumers. Unfortunately, the agency is now working to protect payday lenders.”

Contact: Christopher L. Peterson, 202-387-6121 x1020