Payday Loan Sharks are Allied with New Leadership at the CFPB in Trying to Stop Consumer Safeguards
WASHINGTON, D.C. – Today marks the one-year anniversary of the Consumer Financial Protection Bureau (CFPB) finalizing its rule to stop payday and car-title debt traps. It is the first-ever federal rule of its kind and came after more than five and a half years of development, as shown in this interactive timeline. At the heart of the rule is the common sense and widely-supported principle that lenders check a borrower’s ability to repay before issuing a loan.
The Center for Responsible Lending’s Federal Advocacy Director Scott Astrada issued the following statement:
The CFPB payday rule is badly needed to prevent payday lenders from pulling Americans into a financial freefall of debt, defaults, and despair. In the past year, payday and car-title lenders drained approximately $8 billion in fees from consumers. (PDF)
Payday and car-title loans are a debt trap by design. It is crystal clear in the data. It is also seen by these predatory lenders fighting tooth-and-nail to stop this rule, which simply sets a baseline standard for affordability, from going into effect.
Mick Mulvaney and future leadership at the CFPB should let this basic consumer protection move forward.
Over the past year:
- Predatory lenders tried but failed to meet a deadline for Congress to rescind the rule and block promulgation in the future of a similar rule through a Congressional Review Act (CRA) resolution.
- Mick Mulvaney, who has advocated for eliminating the rule through the CRA, has stated that he intends to reopen the rulemaking process and may publish a proposed rule by February 2019 or earlier.
- The industry, led by the Community Financial Services Association of America and the Consumer Service Alliance of Texas, filed a lawsuit to invalidate the rule and prohibit the CFPB from implementing it.
- Mick Mulvaney decided to have the CFPB join the industry in its effort to delay the rule indefinitely. The court rejected this particular effort, but the case is still pending.
- The U.S. Department of the Treasury, in its recent “fintech” report, called for the elimination of the rule.
Facts on payday loans:
- More than four out of every five payday loans are re-borrowed within a month.
- Three-quarters of all payday loan fees are from borrowers with more than ten loans in the coarse of a year.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Matthew Kravitz at email@example.com or 202-349-1859.