At a field hearing in Kansas City on June 2, the Consumer Financial Protection Bureau (CFPB) proposed a rule to rein in predatory payday and car title lending – an industry that targets communities of color.
Consumer advocates viewed the rule as largely on the right track, though the proposal could still put many people at risk of falling into the debt trap because of loopholes and exemptions. Wade Henderson, president and CEO of The Leadership Conference, testified at the field hearing in favor of the draft regulations, calling them “a very strong step in the right direction.”
“It is a matter of common sense that lenders should ensure that borrowers not simply have enough money to repay their loans – but to ensure that borrowers can repay loans, on time, without being left in an even worse financial position. In the same way that we require drug companies to show that their cures for disease are safe, we have a moral imperative to make sure that the cures being sold for financial ailments aren’t worse than the disease itself,” Henderson said in his testimony. “Thanks in part to Dodd-Frank, mortgage lenders now utilize commonsense Ability-to-Repay rules – and today we applaud the CFPB for applying them to small-dollar lending practices as well. And we look forward to supporting you in your efforts to protect all Americans, including communities of color, from the scourge of predatory loans.”
Established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB began overseeing payday lenders in January 2012, and began accepting complaints in November 2013 from borrowers who encounter issues with payday loans.
At its annual meeting in December 2013, The Leadership Conference unanimously approved a resolution urging states, Congress, and federal agencies to increase regulatory oversight and enforcement of payday lenders.
The CFPB’s proposal comes just weeks after Google announced it would ban ads for payday loans and other predatory lending products – a ban that Henderson said “puts payday loans in their rightful place alongside explosives and tobacco as dangerous products that deserve the highest level of scrutiny from regulators and businesses alike.”