The Consumer Financial Protection Bureau (CFPB) is rolling back protections for consumers that payday lenders needed to first make sure the expensive loans they were selling could be afforded by the consumer.
As it stands now, payday lenders will have a much easier time selling mathematically unaffordable loans and setting consumers up for failure.
The National Consumer Law Center summed up this action best when it said:
“At this moment of health and economic crisis, the CFPB has callously embraced an industry that charges up to 400% annual interest and deliberately makes loans that put people in a debt trap. The CFPB has no basis for gutting the heart of common-sense protections that merely required payday lenders to do what responsible lenders already do: ensure that the borrower has the ability to repay. The evidence to support the debt trap of payday loans is overwhelming and the CFPB’s flimsy excuses for repealing protections do not stand up.
“It is truly shocking that the CFPB, an agency created to protect families from financial abuses, is bending over backward to side with the most scurrilous lenders over the consumers it is supposed to protect.
“The CFPB has not only repealed critical protections against dangerous payday loans but its May template for no-action letters for banks that make small-dollar loans, together with bank regulator guidance that could open the door to single-payment bank loans, could be used to encourage banks to get back into the bank payday loan business. Bank payday loans were a debt trap, and banks should stay out of that business even with the CFPB inviting them back in.
“While the CFPB is allowing the payment provisions of the payday loan rule to go into effect – and the CFPB should immediately ask the Texas court to lift the stay of those provisions – that is cold comfort. The payment rules prevent predatory lenders from subjecting people to multiple fees when payments bounce. It is shocking that we even need rules to prevent that conduct, but curtailing just one dangerous impact of unaffordable loans over 100% APR does not make those loans safe.
“With the CFPB abandoning its role in protecting families, Congress must act now to extend to all families a national rate cap of 36% — which is broadly supported by Americans across the ideological spectrum. Congress should pass HR 5050/S.2833, the Veterans and Consumers Fair Credit Act, which would extend the Military Lending Act’s 36% rate cap to veterans and all consumers.
“In the absence of reform by the federal government, states should adopt or strengthen their interest rate caps. States have had usury laws since the time of the American Revolution, and state interest rate caps are the strongest protection we have today against predatory lending.” – Source
If you are person that turned to a payday loan, the current Trump administration CFPB is clearly sending a message you don’t matter.