FOR IMMEDIATE RELEASE: February 6, 2019
CONTACT: Desmond Lee; firstname.lastname@example.org; 646-517-1826
A Gift to the Payday Loan Sharks
WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) under Trump-appointed Director Kathy Kraninger unveiled a plan to gut the CFPB’s landmark 2017 payday and car title lending rule before it even goes into effect. By eviscerating this consumer protection, Kraninger’s new plan would help predatory lenders continue to trap Americans in debt. Specifically, the proposal would eliminate the common-sense and widely supported requirement that lenders verify that a borrower can afford to repay the loan. [Additional background at bottom of release.]
The Stop The Debt Trap campaign, a coalition of more than 700 consumer, civil rights, faith, veterans, seniors, labor, and other groups in all fifty states, spoke out against this latest effort to gut consumer protections:
“The Kraninger CFPB is giving an early Valentine’s present to payday lenders, helping them continue trapping Americans in crippling cycles of debt,”said Center for Responsible Lending Senior Policy Counsel Rebecca Borné. “The payday rule was developed over years of extensive research and dialogue with stakeholders. Scrapping it will especially harm communities of color, whom payday lenders disproportionately target for predatory loans. The CFPB’s action today should be a call to action for Americans to speak out against the financially-crippling practices of payday lenders.”
“In proposing to undo the rule against abuses in payday and car title lending that the CFPB crafted after five years of careful study and an open process, the new CFPB director Kathy Kraninger is allowing the payday lenders to drive policy at the agency, just as Mick Mulvaney did,” said Linda Jun, senior policy counsel at Americans for Financial Reform. “This puts a vital consumer protection on the chopping block at the behest of predatory payday lenders, inviting them to continue profiting from trapping borrowers in a cycle of debt. We urge the Director to change course and not finalize such a rule”
“The CFPB’s decision to undo payday and car-title lending protections is a slap in the face to consumers—especially people of color—who have been victims of predatory business practices and abusive lenders,” said Vanita Gupta, president and CEO of The Leadership Conference on Civil and Human Rights. “This decision will put already struggling families in a cycle of debt and leave them in an even worse financial position. This administration has moved the CFPB away from protecting consumers to protecting the very companies abusing them.”
“UniodosUS, along with the thousands of Latinos who participated in a national campaign calling for a strong payday rule, have supported efforts to help protect vulnerable consumers and stop the abuse in the payday lending industry. Doing away with the critical ability-to-repay provision as is currently proposed, will open the floodgates once more to unscrupulous lenders. Removing this critical protection will place working families in a position where they are once again easy targets for those seeking to increase their profits without care as to the devastation they are causing for so many Americans trying to make ends meet,” said Marisabel Torres, Senior Policy Analyst at UnidosUS.
“Stripping important protections within this rule is a disservice to the public. With little accountability for their actions, payday lenders have long preyed upon communities of color and drained them of their hard-earned savings. We strongly urge Kathy Kraninger to reconsider her decision to weaken the payday lending rule and allow it to move forward as planned without delay. Every day that goes by without this crucial rule only threatens the financial security of American families throughout our country,” said Hilary O. Shelton, NAACP Washington Bureau Director and Senior Vice President for Policy and Advocacy.
“It’s a tragedy that the agency charged with protecting consumers is proposing to shelve modest but important limits on the debt trap that ensnares working families, seniors, and veterans in endless strings of unaffordable payday loans,” said National Consumer Law Center Associate Director Lauren Saunders.
“Millions of struggling Americans are bogged down in triple-digit interest rate payday loan traps. Now, instead of draining the swamp, the Trump administration is filling it with loan sharks,” said Christopher Peterson, Consumer Federation of America’s Director of Financial Services and Senior Fellow.
“This reckless proposal written by and for the predatory payday loan lobby could potentially shove millions of Americans into the debt trap,” said Jeremy Funk, spokesman for Allied Progress.“It’s as if Trump wants another recession. While it’s anathema to CFPB’s mission of protecting consumers, it’s obvious why the Trump administration is pursuing it. This is payback – pure and simple – for the nearly $2 million in support the payday lending industry has showered on Trump’s campaign and his inauguration fund, not to mention for hosting a major conference at a Trump resort.”
CFPB research found that “[m]ore than four out of every five payday loans are re-borrowed within a month, usually right when the loan is due or shortly thereafter,” an indication that the loan was not affordable in the first place.
The 2017 payday rule disrupts this exploitative, debt trap business model and establishes a vital consumer protection. The core of this protection is the “ability-to-repay” standard, which requires that short-term payday and car title lenders check that a borrower can afford the loan, taking into account income and expenses. The rule also requires a break after three back-to-back loans made without considering ability to repay. Additional information can be found in this two-page summary of the payday rule.
Kraninger’s action today directly contradicts the views of the American public, who — across the political spectrum — support holding the financial industry accountable. A 2018 poll found that 79 percent of likely American voters support the CFPB’s payday rule, which includes support from Republicans at 82 percent, Independents at 83 percent, and Democrats at 77 percent.
Parties interested in weighing in on the proposal to gut the rule, officially titled a Notice of Proposed Rulemaking (NPRM), will have 90 days to submit comments to the agency. The comment time period starts once the NPRM is published in the Federal Register, which is expected in the coming days.