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Members of the PaydayFreeLandia coalition sent strongly-worded letters today to Consumer Financial Protection Bureau Director Richard Cordray, calling on the federal consumer watchdog agency to crack down on predatory payday lending.
The coalition represents the 14 states and DC, which ban predatory payday lending, and includes more than 40 faith leaders, labor, civil rights, and community groups, and credit unions. PaydayFreeLandia groups submitted the letters, signed by several hundred state and local elected officials and organizations, in response to rules the CFPB has proposed to address predatory payday lending.
The groups expressed serious concern that the agency’s proposed rules – the country’s first-ever federal rules to address payday lending – are far too weak, and could jeopardize their strong state laws.
“We are deeply concerned that weaknesses and loopholes in the proposed rule sanction dangerous loan products and will not stop the debt trap,” stated the letter signed by 171 North Carolina organizations. “This is bad for North Carolina and bad for every other state in the country. If these weaknesses and loopholes are not closed, your final rule will threaten our state consumer protections by lending undeserved legitimacy to predatory products and practices.”
PaydayFreeLandia groups forcefully made the case that people in their states are much better off without predatory payday lending, and the CFPB should use its full authority to end the payday loan debt trap. They urged the CFPB, at a minimum, to include in the final rule:
- Sound underwriting requirements, including that all lenders verify that borrowers can afford to repay loans made to them, without exceptions or safe harbors; and
- Provisions that spell out a principle that CFPB has already embraced: that conduct that violates state-level consumer protection laws would constitute unfair, deceptive, acts or practices, in violation of federal law. This provision, which groups also urged in a joint letter to the CFPB, is needed to ensure that payday lenders do not use a weak CFPB rule to undermine strong state usury and other laws that prohibit predatory payday lending.
“The CFPB must reject the notion that access to payday loans – usurious credit – is a lifeline for low- income families and should therefore be preserved,” stated the letter from New Economy Project, a coalition member based in New York. “To the contrary, payday lending exploits – rather than meets – the needs of working poor Americans. Fundamentally, payday lending thrives because so many people are struggling to make ends meet.”
More than 93 million Americans – one-third of the country – live in states where payday lending is illegal. If taken alone, PaydayFreeLandia would be the 15th largest country in the world. Most of these jurisdictions ban car title loans as well, which the CFPB rules also seek to address. Approximately 500,000 comments have reportedly been filed with the CFPB, calling on the agency to issue a strong rule and end the payday lending debt trap.
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