CFPB Director Kraninger strips away consumer protections from predatory payday loans
As families are knocked down by the COVID-19 public health and economic crisis, the CFPB keeps families exposed to financial ruin from unaffordable 400% interest rate loans
WASHINGTON, D.C (July 7, 2020) — Today, the Consumer Financial Protection Bureau’s (CFPB) Trump-appointed Director Kathy Kraninger released a final rule that eliminates basic protections from payday and car-title loans that trap consumers in debt. Today’s action guts the 2017 CFPB Payday Rule by eliminating that rule’s main consumer protection: the commonsense requirement that lenders verify borrowers have the ability to repay a loan before the lender issues the loan.
Center for Responsible Lending (CRL) President Mike Calhoun issued the following statement:
“This action helps payday and car-title lenders continue to spring debt traps for financially vulnerable families. There is never a good time to enable predatory loans carrying 400% interest rates, but this is the worst possible time.
“The pain caused by the CFPB gutting the payday rule will be felt most by those who can least afford it, including communities of color who are disproportionately targeted by payday lenders.
“Payday and car-title lenders pull borrowers into financial quicksand. The CFPB’s own research shows that four out of every five payday loans are reborrowed within two weeks – because borrowers can’t afford to repay the initial loan. Taking out a payday loan makes a person more likely to lose their bank account, rack up overdraft fees, and file for bankruptcy. One in five car-title borrowers has their vehicle seized.
“With today’s action, the politically appointed leadership of the Consumer Financial Protection Bureau is actively facilitating harm to consumers at a time of crisis and uncertainty.”
In 2017, under a different director, the CFPB issued its original Payday Rule, which consisted primarily of the ability-to-repay (ATR) standard and protections for borrowers’ bank accounts against repeated bounced payments. A one-page overview of the 2017 Payday Rule is linked here. Today’s final rule guts the 2017 rule by rescinding the ability-to-repay provisions of the 2017 rule.
About Center for Responsible Lending
The Center for Responsible Lending (CRL) is working to ensure a fair, inclusive financial marketplace that creates opportunities for all responsible borrowers, regardless of their income, because too many hard-working people are deceived by dishonest and harmful lending practices.
While the housing crash was devastating to families at all income levels, it was disproportionately destructive to entire communities of low- and moderate-income families and borrowers of color. In fact, it wiped out generations of family wealth in these communities. Many of these families had successful 30-year loans, but they were lured by the promises of deceptive marketing and then financially devastated when they were placed in egregious loan products.
CRL is a nonprofit, non-partisan organization that works to protect homeownership and family wealth by fighting predatory lending practices. Our focus is on consumer lending: primarily mortgages, payday loans, credit cards, bank overdrafts and auto loans.