Published: October 2014

Fixing the predatory lending industry for good

The Consumer Financial Protection Bureau (CFPB) is currently developing new rules to regulate high cost ‘quick fix’ loans - like payday loans. Consumer Action has joined nearly 500 other organizations from around the country in a letter urging the CFPB to write regulations that are strong enough to effectively end the ‘debt trap’.

The Consumer Financial Protection Bureau's (CFPB) own research has well documented the debt trap created by payday lending, with the typical borrower indebted for more than 200 days a year and 75% of all payday loan fees generated by borrowers trapped by more than 10 loans a year.

The CFPB has before it this unique opportunity, and indeed obligation, to bring meaningful reform to the marketplace. The coalition urged that any rule addressing payday, installment, car title or any other short term lending product accomplish the following:

1.    “Require the lender to determine the borrower’s ability to repay the loan, including consideration of income and expenses;

2.    “Does not sanction any series of repeat loans or provide any safe harbor of poorly underwritten loans;

3.    “Establishes an outer limit on length of indebtedness that is at least as short as the FDIC’s 2005 guidelines – 90 days in a twelve-month period;

4.    “Restricts lenders from requiring a post-dated check or electronic access to a borrower’s checking account as a condition of extending credit.”

Lead Organization

Consumer Federation of America (CFA) & Americans for Financial Reform (AFR)

Other Organizations

Advantage Credit Counseling Service, Inc. AFL-CIO | Alliance for Just Society | American Civil Liberties Union | Americans for Financial Reform Association for Enterprise Opportunity | CDFI Coalition | Center for Economic Justice | Center for Responsible Lending | Coalition on Human Needs Community Development Bankers Association | Community Development Venture Capital Alliance | Consumer Action | Consumer Federation of America | Consumers Union | Democratic Media | Ecumenical Poverty Initiative | Faith in Public Life | Gray Panthers | Habitat for Humanity International | Help Hotline Crisis Center | Homeownership Preservation Foundation | The Leadership Conference on Civil and Human Rights | League of United Latin American Citizens (LULAC) | NAACP | National Advocacy Center of the Sisters of the Good Shepherd National Association of Consumer Advocates | National Consumer Law Center (on behalf of its low-income clients) National Council of La Raza | National Development Council | National People’s Action | NETWORK, A National Catholic Social Justice Lobby | Other98.com | Partners for the Common Good | PICO National Network | Public Citizen | Residential Resources, Inc. | U.S. PIRG | United Church of Christ Justice and Witness Ministries | United Food & Commercial Workers International Union, CLC United for a Fair Economy | USAction | Working Families Organization

More Information

To read the coalition's entire letter, please click here.

For more information please visit CFA and AFR's websites.

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