Today, the Consumer Financial Protection Bureau (CFPB) issued a small-dollar loan final rule that will strip away protections that had been the hallmark of the original 2017 rule. It eliminates the portion of the rule that had created “mandatory underwriting provisions” for certain single repayment (“balloon payment”) payday and vehicle title loans, and as a result, payday and vehicle title lenders will no longer have to take steps to verify that applicants have the ability to repay their loans.
Jesse Van Tol, CEO of the National Community Reinvestment Coalition, made the following statement:
“This is a shameful step backward for an agency that was supposed to protect vulnerable consumers from abusive lenders. Instead, it ensures that payday loan companies will benefit at the expense of vulnerable Americans.
“By the CFPB’s own analysis, the weakening of the rule will save payday lenders $7.3 billion per year.
“The Bureau has taken this action even though it completed extensive research that documented the damage inflicted by payday lending. The CFPB found in a 2013 survey that single repayment short-term high-cost loans can trap some borrowers in a repeating cycle of debt. It is also known by the CFPB that nearly half of all storefront payday loan customers made ten or more transactions per year.
“The CFPB also moved forward with this new final rule despite opinions of the great majority of the nearly 200,000 comments it received from the public. Moreover, according to emails released by a former staff economist, the Bureau’s leadership even went so far as to order staff to manipulate its cost-benefit analysis to make it appear that the changes would be ‘net positive’ for the economy.
“Incredibly, at a time when our nation is confronted with daunting challenges to our economy and perhaps even to our democracy, the CFPB has chosen to go ahead with a rule that puts people in harm’s way. By removing safeguards against debt traps, the Bureau has gone against the very spirit of its existence, and now deserves to be called out for what it has become: an advocate for payday lenders.”