Banking & Credit

The CFPB is Reversing Course on High-Cost Lending to Protect Payday Lenders

Washington, DC – Today, the Consumer Financial Protection Bureau (CFPB) announced plans to initiate a rulemaking that would allow the CFPB to reverse course on the CFPB’s final Payday lending rule.

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 some similar forms of credit were required to determine whether borrowers can afford loan payments while still meeting basic living expenses and major financial obligations. Payday lenders were required to comply with these protections by August 19, 2019. The Bureau’s final rule was the product of years of study, analysis, and public comment.

With new leadership in place at the CFPB, the agency is now signaling its intentions to re-open the rulemaking process and reverse course on the payday lending rule.

Christopher Peterson, a Senior Fellow at the Consumer Federation of America and the John J Flynn Endowed Professor of Law at the University of Utah, made the following statement:

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

“President Trump came into office promising to remember the forgotten people that are struggling throughout middle America. Instead, the Administration has taken the side of predatory payday lenders that collect triple-digit interest debts from our most vulnerable families.”

“A super-majority of Americans, both Republicans and Democrats support traditional interest rate limit of no more than 36 percent. Instead, of siding with the public, or even the CFPB’s compromise regulation, President Trump is working hand-in-hand with the usurious money changers that cause so much suffering.”

“Payday loans have average interest rates of about 400 percent. By way of comparison, New York City criminal loan sharking syndicates charged average interest rates of 250 percent at the height of their power in the 1960s. The CFPB itself found that the majority of short-term payday loans are borrowed by consumers who take out a least 10 loans in a row, with the borrower paying far more in fees than they received in credit.”

“The CFPB was supposed to protect consumers. Unfortunately, the agency now appears to be taking steps to protect payday lenders instead.”

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