Payday, car title loan rule could save U.S. consumers millions

Rule proposes regulating predatory lending that traps consumers in a cycle of debt

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Washington, DC—Today, the Consumer Financial Protection Bureau (CFPB) unveiled a proposal for a new national rule on payday and car title lending that has the potential to save millions for U.S. consumers. Research shows that these types of loans typically carry annual percentage rates of 300 percent or more and extract fees that quickly add up to far more than the amount borrowed.

“A desperate borrower stuck in a never-ending cycle of debt is the bread and butter of these predatory payday lenders,” said Linda Sherry, director of national priorities for Consumer Action. “It’s high time the Consumer Financial Protection Bureau took firm action to counter their tricks. We urge the Bureau to close any remaining loopholes that allow loan sharks to disproportionately trap low-income, minority individuals.”

The proposed rule addresses the amount of time and flexibility that lenders give borrowers for loan repayment. All too often, high-cost loans lead to devastating consequences for consumers—repeat overdraft fees, bank account closures and repossessed cars (when people are forced to pawn their vehicles). Consumer Action and advocates around the country have been pushing for a rule that would require lenders to assess a borrower's ability to repay a loan without limiting their ability to afford basic necessities, like rent and groceries, and without immediately taking out another loan.

“This rule is a good start,” Sherry said. “But as it stands, the rule contains dangerous exemptions that would allow lenders to skirt the requirement to ensure that borrowers have the ability to repay a loan, and it would still let lenders 'flip’ borrowers from one high-interest loan to another."

A 2014 study by the CFPB found that four out of five payday loans are rolled over or renewed, further trapping borrowers in a spiral of debt.

Click here for more information on the pros and cons of the proposed rule.

The CFPB will be seeking feedback on the proposed rule from the public until Sept, 14, 2016. Then it is expected to consider all suggestions before making the rule final in 2017.

Consumer Action encourages you to provide feedback on the proposal and suggest changes. Comments can be offered at


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Consumer Action has been a champion of underrepresented consumers nationwide since 1971. A non-profit 501(c)(3) organization, Consumer Action focuses on consumer education that empowers low- and moderate-income and limited-English-speaking consumers to financially prosper. It also advocates for consumers in the media and before lawmakers to advance consumer rights and promote industry-wide change.

By providing consumer education materials in multiple languages, a free national hotline, a comprehensive website ( and annual surveys of financial and consumer services, Consumer Action helps consumers assert their rights in the marketplace and make financially savvy choices. Nearly 7,000 community and grassroots organizations benefit annually from its extensive outreach programs, training materials and support.




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