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The CFPB released its proposal today for gutting its own payday lending protections, which were originally set to go into effect this August. U.S. PIRG consumer campaign director Mike Litt issued the following statement:
“The Consumer Financial Protection Bureau, under Director Kathy Kraninger, has officially given predatory debt traps its seal of approval. By proposing to get rid of its underwriting requirement, the CFPB is gutting its own protections.
These protections were already a compromise. Just this year, in an overwhelming citizen ballot vote, Colorado became the 16th state (along with D.C.) to cap loans at 36 percent APR. This served as an important alternative to allowing triple-digit payday debt traps. But consumers in other states need protections too. The CFPB is prohibited from setting interest rate caps. So under previous Director Richard Cordray, it did the next best thing by simply requiring lenders to check if a customer can repay the high interest rates.
These protections were the result of a 5-year, data-driven approach to the problem. After all that, today’s proposal is a reckless rubber stamping of predatory lending.
We know better. Our own 2016 analysis of written complaints to the Consumer Bureau about payday loans found significant evidence of the major problem with payday loans: Borrowers can’t afford these loans and end up stuck in a cycle of debt. On that point, 91 percent of written complaints were related to unaffordability of these loans.
We encourage consumers to speak up and submit comments against today’s proposal during the CFPB’s 90 day public comment period.”
U.S. PIRG is the federation of state Public Interest Research Groups. PIRGs are non-profit, non-partisan public interest advocacy organizations that stand up to powerful interests whenever they threaten our health and safety, our financial security, or our right to fully participate in our democratic society. On the web at www.uspirg.org.
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