In June, the Consumer Financial Protection Bureau (CFPB) released a proposal for the first federal regulation of payday, car title, and other high-cost consumer loans. After the close of the comment period on October 7, the bureau will analyze the feedback and craft final rules with the potential to benefit millions of people across the United States.
“Caught in the Debt Trap” provides a snapshot of the effect payday and title loans have had on the lives of nine people. Their personal stories illustrate how lenders take advantage of people and how these loans can leave borrowers in a devastating cycle of poverty and debt that lasts for years.
The CFPB has the power to significantly reform the industry—and to promote affordable, non-predatory lending—by issuing a strong final rule.
The proposed rule needs strengthening. The proposals below need to be included in any final rule:
- Close the loophole allowing six loans per year at 300 percent annual interest.
- Strengthen protections on flipping both long-term and short-term loans.
- Strengthen the way lenders document basic living expenses and require use of objective measures for determining if a borrower can afford the loan.