Payday and Other Small Dollar Loans

These organizations support the CFPB’s conclusion that accounts used to access BNPL credit are credit cards that must comply with credit card rules governing disputes, errors, periodic statements and disclosures. Those protections will enhance the safety of BNPL credit and make it easier for consumers to manage their finances.

The 193 labor, civil rights, consumer, legal services and community groups and academics joined in this letter to express opposition to the draft Earned Wage Access Consumer Act. In the guise of offering protections, the bill obscures its true effect: to exempt fintech cash advances from the Truth in Lending Act, to endorse a form of loan that makes workers...

Consumers who took out small loans using cash advance apps paid triple-digit annual interest rates, experienced high levels of repeat reborrowing, and incurred more bank overdraft fees.

This legislation purports to provide a safe harbor for financial innovation, but too often, “innovation” is synonymous with a lack of meaningful safeguards for consumer financial products. Creating these regulatory “sandboxes” for companies would force agencies to shirk their statutory duties to enforce the law and protect consumers and instead prioritize allowing risky and unproven products into the marketplace before...

In the 1990s payday lenders partnered with banks to create a practice known as Rent-a-Bank. This practice exploits a provision of federal law that allows banks to export their interest rates across the country, ignoring state laws meant to protect borrowers from abusive high-rate lending that can lead to a debt trap. While predatory lenders originally used store-front payday locations...

Payday loans, high-cost small loans averaging $350 that usually must be repaid in a single payment after two weeks, are designed to create a long-term debt trap for consumers. A 36% annual percentage rate (APR) cap on payday loans (including fees) is the best way to stop the cycle of debt. To date, 20 states and the District of Columbia...

The California Department of Financial Protection and Innovation (DFPI) should restore cost limits for earned wage advances and other fintech cash advances under proposed regulations rather than allow a temporary registration regime with no cost limits for up to four years, the Center for Responsible Lending, Consumer Federation of California, National Consumer Law Center, and Office of Kat Taylor said...

Buy Now, Pay Later (BNPL) or pay-in-four products allow consumers to purchase goods in four equal, often interest-free installments over a set time period (often 6 weeks). BNPL is often available directly at checkout on an e-commerce website (like Amazon or Apple) or through a third-party smartphone or web application. Examples of third-party BNPL providers include Affirm, AfterPay, Klarna, Splitit...

Consumers are increasingly accessing small short-term loans through digital cash advance and Earned Wage Advance (EWA) online applications. Consumers can receive advance amounts up to $750 per pay period while using these apps. Some companies contract with employers to provide this product while others work directly with consumers. In the direct-to-consumer model, the advances are often marketed as “free,” but...

Millions of Americans continue to experience financial precarity, and this report illustrates how payday and car-title lending extract financial resources from communities across the United States.