New national rule promises to rein in payday lenders

Contact: Ruth Susswein (301) 718-2511; Linda Sherry (202) 544-3088

Consumer Financial Protection Bureau rule will help break cycle of debt for consumers

Washington, DC - On Thursday, the Consumer Financial Protection Bureau (CFPB) announced a new rule to limit the ability of short-term payday and vehicle title lenders to trap borrowers in debt. The rule requires that the lenders check a borrower’s ability to repay before lending them money, lessening the likelihood that borrowers will need to borrow even more money or default on everyday expenses (like rent or groceries) in order to pay off the loan. The rule also limits lenders' automatic access to borrowers’ bank accounts. Payday loans often carry interest rates in excess of 300%, trapping consumers in debt.

Consumer Action applauds the CFPB rule as a good start while maintaining that strong state laws, with interest rate caps, remain critical to reining in predatory, high-cost loans.

“The CFPB’s new protections are a desperately needed start to help consumers avoid the long-term pain of payday loan debt traps”, said Linda Sherry, Consumer Action’s director of national priorities. “Finally, the loan sharks who peddle payday, car title and installment loans will be held accountable for their predatory actions masquerading as debt relief.”

Sherry also warned, “Unfortunately, we anticipate that many Republicans in the Senate, who have been trying to defund and disempower the CFPB, will look to the Congressional Review Act to repeal the CFPB’s new rule. Congressional Republicans have been using this Act liberally to overrule even the most common-sense regulations, no matter how helpful they are to consumers.”

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Through multilingual consumer education materials, community outreach and issue-focused advocacy, Consumer Action empowers underrepresented consumers nationwide to assert their rights in the marketplace and financially prosper.

 

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