On Thursday, March 26th the CFPB went to Richmond, VA, to hold a field hearing and release a first look at its potential plans to regulate payday, installment and car title loans. The draft proposal is broad in scope and holds at its core the importance of an “ability to repay” standard. Count up two big wins for the advocacy community! But the proposal also contemplates dangerous exceptions to the meaningful application of the ability to repay principle. We’ll be working hard to push the CFPB to close the loopholes as this process moves forward. Groups from around the country both applauded the progress the CFPB is taking on the issue and highlighted the importance of strengthening the rule.
At the hearing, Director Richard Cordray, Virginia Attorney General Mark Herring, and panelists from Virginia Poverty Law Center, Center for Responsible Lending, The Leadership Conference on Civil and Human Rights and California Reinvestment Coalition all stressed the need for a strong rule that will #stopthedebttrap. “CFPB can have tremendous impact in protecting borrowers from dangerous loans”, said Mike Calhoun of Center for Responsible Lending. He continued, “So it’s critical that CFPB’s rule address payday installment loans, and also that states remain vigilant in applying state usury limits to these loans.”
Beforehand, more than 80 advocates and allies gathered at the Richmond Convention Center for a press conference and community meeting, and during the hearing more than 30 people – borrowers, faith leaders, state and national advocates, consumer lawyers, and others – testified in favor of a strong payday rule.
Thanks to all who attended, spoke, tweeted, retweeted, selfied, and thunderclapped to get our #stopthedebttrap message out! See the Storify from the event, which features tweets that were posted on the day of the hearing.
Thursday was a big day for predatory lending reform as President Obama also took up the issue during his visit to Birmingham Alabama. He spoke about the dangers of predatory lending, “You borrow money to pay for the money you already borrowed,” the President said, aptly describing the way most payday loans play out. “… If you take out a $500 loan, it’s easy to wind up paying more than $1,000 in interest and fees.” The President also participated in a roundtable meeting on the subject of payday loan reform with community leaders. View video of the President’s remarks on the need to protect consumers from predatory lending practices.
The Consumer Financial Protection Bureau, the agency created at President Obama’s urging in the aftermath of the financial crisis, took its most aggressive step yet on behalf of consumers on Thursday, proposing regulations to rein in short-term payday loans that often have interest rates of 400 percent or more.
President Obama pushed for stricter payday lending rules Thursday as he defended the federal government’s consumer protection watchdog against Republican efforts to defund the agency.
“The idea is pretty common sense: if you lend out money, you should first make sure that the borrower can afford to pay it back,” Obama said.
State Payday Advocate’s Stories
Rev. Swadley from Virginia
“I have seen desperate people think they are finding a solution and then end up near or in bankruptcy.”
Dana Wiggins from Virginia
“Consumers in a financial bind need real solutions and want money, but they never say they want a triple digit interest rate loan, or to be saddled with yet another bill they can’t really afford”
Ward R. Scull from Virginia
“…unfettered financial practices and usury are neither moral nor consistent with sound financial practices and systems”