This afternoon, the House Financial Service subcommittee on Consumer Protection and Financial Institutions will hold a hearing entitled, “Ending Debt Traps in the Payday and Small Dollar Credit Industry.”
The hearing that will touch on the predatory nature of payday lending, the terrible decision of the CFPB to propose crippling crucial consumer protections on this form of credit, and new legislation to establish a 36 percent APR federal rate cap that does not override stronger state laws .
The hearing on payday lending comes at a time when the Consumer Financial Protection Bureau is nearing the end on a public comment period on its plan. The CFPB is proposing to rescind key consumer protections on payday lending, namely the ability-to-repay provision that mandates that lenders offer affordable loans.
“Payday loans are debt traps by design, carrying 300% APR on average. They perpetuate economic inequality and the racial wealth gap. The Consumer Financial Protection Bureau should implement without delay its rule to rein in these predatory loans. Congress should enact a 36% APR rate cap that does not override stronger state laws,” said Diane Standaert, Director of State Policy and Executive Vice President at the Center for Responsible Lending (CRL).
“A supermajority of Americans support reasonable limits on predatory payday loans and similar forms is high-cost debt. With the Trump administration appears to be turning its back on protecting low- and moderate-income consumers, we need Congress need step up more than ever,” said Chris Peterson, Director of Financial Services and a Senior Fellow at the Consumer Federation of America.
“Predatory payday lenders make their money by entangling people in debt traps,” said Linda Jun, senior policy counsel for Americans for Financial Reform. “The current CFPB proposal to undo the rule against payday and car title abuses gives these lenders a green light to keep taking billions of dollars a year from economically vulnerable people. We are pleased that the House is focusing on the harms of the debt trap, and we urge members to take action to protect consumers.
Background information and a live-stream of the hearing are on the Committee’s website.