New Rule Requires Lenders to Consider a Borrower’s Ability to Repay a Loan
Washington, D.C. – Following today’s announcement from the Consumer Financial Protection Bureau (CFPB) that it has finalized a new rule protecting consumers of payday, car title, and other short-term loans, Allied Progress announced it will fight efforts by special interest backed-Republicans in Congress to repeal the rule using the Congressional Review Act or other methods.
The new rule will help the more than 12 million consumers who fall victim each year to the underhanded business practices of payday lenders – an industry that deliberately traps customers in cycles of debt featuring interest rates that, on average, exceed 300 percent. Because of the CFPB’s bold action, lenders must now take the borrower’s ability to repay the loan into consideration – an important requirement when one considers the payday loan business model: focus lending on those who can only repay loans by taking out new loans.
“Each year payday lenders trap millions of Americans in hard to escape cycles of debt with loans featuring 300 percent, even 500 percent, interest rates. Their goal is to ensnare these borrowers in debt traps where the only hope of escape is to take out another loan. With this new rule, the Consumer Financial Protection Bureau is making meaningful progress in the fight to end this debt trap once and for all,” said Karl Frisch, executive director of Allied Progress.
He continued, “This rule is a no-brainer. It simply requires lenders to determine whether a consumer has the ability to repay a loan without hardship or re-borrowing – a requirement that will help stop the debt trap and reduce defaults. The payday lending industry preys on the most vulnerable among us. Now, with this new rule, millions will be spared years of agony perpetrated by payday lenders looking to make a quick buck.”
“Payday lenders have spent millions of dollars currying favor with powerful Washington politicians and they will do whatever it takes to kill this rule and keep this extremely lucrative predatory racket humming. We owe it to hard working men and women everywhere to remain vigilant and fight any effort to repeal this rule. We simply cannot allow the debt trap to continue,” he concluded.
The CFPB’s payday lending rule has been in the works for more than two years, and its announcement follows an extensive information gathering and public comment period where the Bureau carefully considered input from industry, consumer advocates, and every day Americans.
Earlier this year, Allied Progress debunked criticisms by the payday lending industry that, during the rulemaking process, the CFPB ignored consumers who had favorable opinions of payday loans. In just minutes, an Allied Progress analysis was able to find hundreds of individually submitted, supposedly personal public comments that included many of the exact same personal stories, sentences, and paragraphs – word-for-word – in support of payday loans and opposition to the CFPB’s proposed rule. More on that here.
Allied Progress launched PaydayLendingFacts.org to expose the payday lending industry, combat its misinformation, and provide the public with the truth about payday lenders and their allies in Congress. The website features hundreds of pages of easily accessible research.
To speak with Karl Frisch about the CFPB’s payday lending rule, please contact Annette McDermott at 202-697-4804 or firstname.lastname@example.org.
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Allied Progress uses hard-hitting research and creative campaigns to stand up to Wall Street and powerful special interests and hold their allies in Congress and the White House accountable.