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Financial CHOICE Act Exempts Payday and Car Title Lenders from Consumer Agency Regulation

Monday, April 24, 2017
Diane Standaert

WASHINGTON, DC – House Financial Services Committee Chairman Jeb Hensarling (R-TX) recently released text of the so-called Financial CHOICE Act 2.0, his plan to repeal and replace the Dodd-Frank financial reform law. The Chairman’s legislation would prevent the Consumer Financial Protection Bureau (CFPB) from regulating payday and car-title lenders. This is a new provision that was not in last year’s version of the bill. The Financial CHOICE Act 2.0 is scheduled to have a hearing on this Wednesday, April 26th.

Section 733 of the CHOICE Act 2.0 discussion draft:

(t) NO AUTHORITY TO REGULATE SMALL-DOLLAR CREDIT.—The Agency may not exercise any rulemaking, enforcement, or other authority with respect to payday loans, vehicle title loans, or other similar loans.

In response to this development, CRL Executive Vice President Diane Standaert issued the following statement:

This provision will make predatory lenders jump for joy, but if enacted, it would cause misery for struggling families across America.

Payday lenders charge 300% or more, trapping people in a cycle of debt. Payday and car-title loans often drain hundreds of dollars from a person’s bank account in amounts well above the original loan amount.

Instead of giving free rein to practices that intentionally push people deeper into debt, Congress should let the CFPB do its job to prevent these debt traps.

The Center for Responsible Lending (CRL) has documented the enormous harm predatory payday and car-title lending has on working families. Our 2016 report found that payday and car title lenders drain $8 billion in fees every year from states that don’t ban the practices. Where they are legal, these loans typically lead to debt which is nearly impossible to escape, and are related to a cascade of other financial consequences, such as increased overdraft fees, delinquency on other bills, involuntary loss of bank accounts, and even bankruptcy. For car title, the end result is too often the repossession of a borrower’s car, a critical asset for working families.

Here are a few items for your reference:

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Matthew Kravitz at 202.349.1859