Payday and Other Small Dollar Loans

This letter urges Congress to support the Senate and House companion bills, S. 1659/H.R. 3760, the “Protecting Consumers from Unreasonable Credit Rates Act,” sponsored by Senator Richard Durbin, Senator Jeff Merkley, Representative Matt Cartwright, and Representative Steve Cohen. The Senate and House bills would extend to all consumers a 36 percent usury APR cap. A fair rate cap will protect...

Payday lending is a high-cost loan product that is built on its ability to churn consumers through a cycle of debt, collecting fees for as long as possible. Fortunately, 15 states and the District of Columbia have made a definitive statement to prohibit high-cost payday loans by adopting interest rate caps of 36% or less. The experiences of consumers in...

Payday lending involves small‐dollar, high‐interest loans that trap consumers into a long‐term cycle of debt and fees. Payday lenders tout themselves as a needed service providing access to emergency credit. However, with weak underwriting and ability to repay standards, the payday loan model creates a debt trap that is easy to get into, but extremely difficult to escape. Each year...

Banks once drained $500 million from customers annually by trapping them in harmful payday loans. In 2013, six banks were making triple-digit interest payday loans, structured just like loans made by storefront payday lenders. The bank repaid itself the loan in full directly from the borrower’s next incoming direct deposit, typically wages or Social Security, along with annual interest averaging...

Payday and car title loans are small-dollar, high-cost products that thrive on keeping consumers in a cycle of debt. With lenders doing essentially no underwriting, consumers find it easy to obtain these loans, often marketed as a solution to financial emergency. However, the unaffordability of the loan and the lenders extreme leverage over the borrowers – either through direct access...

Lenders can and do make non-covered loans without regard to the borrower’s ability to repay as scheduled, and doing so can be highly profitable. In particular, high-cost loans provide a significant disincentive against lending based on ability to repay, even absent a coercive repayment mechanism or security. When rates are high, lenders can profit despite significant defaults and can even...

The California State Legislature and the California Attorney General, Kamala Harris, both submitted comments to the Consumer Financial Protection Bureau in favor of strengthening the proposed rule on payday and car-title lending. Download both of the letters with the link above to read the key points laid out to curb these predatory lending practices.

The Consumer Financial Protection Bureau’s (CFPB or the Bureau) proposed rule to address payday, vehicle title, and other certain high-cost installment loans marks the culmination of over four years of extensive information gathering and data analysis by the Bureau. We thank and commend the Bureau for this work, which has resulted in a robust record of evidence that strongly supports...

The Consumer Financial Protection Bureau’s (CFPB or the Bureau) proposed rule to address payday, vehicle title, and other certain high-cost installment loans marks the culmination of over four years of extensive information gathering and data analysis by the Bureau. We thank and commend the Bureau for this work, which has resulted in a robust record of evidence that strongly supports...

CRL Response to “Reframing the Debate about Payday Lending by Liberty Street Economics” Research Comment On: "Do Defaults on Payday Loans Matter?" by Robert Mann Research Comment On: "Payday Loan Rollovers and Consumer Welfare" CRL Critique of “Payday Holiday: How Households Fare After Payday Credit Bans” by Donald P. Morgan and Michael R. Strain CRL Review of "Defining and Detecting...