New York comment letter to CFPB on proposed payday lending rule
October 7, 2016
Via Electronic Submission
The Honorable Richard Cordray
Consumer Financial Protection Bureau
1700 G Street NW
Washington, DC 20552
Re: Proposed rulemaking on payday, vehicle title, and certain high-cost installment loans, Docket No. CFPB-2016-0025 or RIN 3170-AA40
Dear Director Cordray:
We, the 131 signatories to this letter, represent a diverse cross-section of elected officials, government, labor, grassroots organizing, civil rights, legal services, faith-based and other community organizations, as well as community development financial institutions. We respectfully request that the CFPB count this letter as 131 comments.
Together, we urge you to issue a strong payday lending rule that ends the payday loan debt trap. As the CFPB prepares to issue a final rule to address payday lending nationally, we urge you not to undermine our state’s longstanding civil and criminal usury laws. Indeed, we urge you to issue a rule that enhances our existing protections.
As the CFPB undoubtedly recognizes, a list of signatories of this magnitude and breadth is not to be taken lightly. This letter reflects the position of more than 38 state and local elected officials, the NYC Department of Consumer Affairs, the Progressive Caucus of the NYC Council – as well as 92 organizations that represent a broad spectrum of communities, perspectives, and constituents. We are concerned that the CFPB is poised to issue a weak rule that would not only set a low bar for the entire country, but that would also directly undermine our state’s longstanding ban on payday lending.
As New Yorkers, we believe we have an especially relevant perspective to share. More than 90 million Americans – nearly a third of the country – live in states like New York where payday lending is illegal. Our experience clearly demonstrates that: (1) people are way better off without payday lending; and (2) the best way to address abusive payday lending, as well as other forms of predatory high-cost lending, is to put an end to it once and for all.
As proposed, the CFPB’s payday lending rule is filled with loopholes and would effectively sanction high-cost loans that are illegal in our state and many other jurisdictions in the country. We call on the CFPB to issue a strong final rule that does not undermine New York’s longstanding usury and other consumer protection laws. We urge you to set a high bar for the entire country and issue a rule that enhances, and does not undermine, our existing protections. We call on the CFPB to use its full authority to issue the strongest possible final rule that will truly end the payday loan debt trap.
The payday lending industry has thrived because so many people in our country do not have sufficient income to cover their basic living expenses. The last thing struggling people need are predatory, high-cost loans that dig them into an even deeper hole — precisely what happens now in states that permit payday lending. Indeed, many New Yorkers are in financial distress, struggling to make ends meet from paycheck to paycheck (or government benefits check to government benefits check), and the fact that we do not permit payday lending here has proven vital to protecting a huge segment of the population from financial exploitation. Where payday lending is legally permitted, the industry has targeted black and Latino communities, draining hundreds of millions of dollars and perpetuating the racial wealth gap in the U.S.
In short, we consider ourselves extremely fortunate to live and work in a state that bans payday lending. Our centuries-old usury law makes it a felony to charge more than 25 percent interest on a loan. Keeping payday lending out of New York has provided vast benefits to New Yorkers, local communities and the state economy at large. Each year, for example, our state’s usury law saves New Yorkers approximately $790 million that they would otherwise spend on fees for unaffordable payday and car title loans.
Despite these clear advantages, payday lenders have for many years attempted to crack open our usury law and make predatory high-cost lending legal in our state. Seeing an untapped, lucrative market they could exploit in New York, the payday lending and check cashing trade groups have repeatedly pushed our state legislature to legalize high-cost payday and other forms of harmful lending. Time and again, these efforts have pitted the public interest against predatory lending interests, leading to ugly battles between community groups and industry, and draining massive public resources in the process. Fortunately, we have successfully beat back these attempts to gut our usury law, thanks in large measure to effective advocacy by a broad coalition of community, labor, and civil rights groups, which has ensured that payday lending remains illegal in our state.
We are well aware that the CFPB may not set interest rates, but the agency can and should use its full authority to take strong action. Absent strong federal action, stopping payday lending, including payday installment lending, will continue to be a game of whack-a-mole.
We are extremely concerned that a weak CFPB rule will play right into the hands of the payday lending industry, providing it with ammunition needed to defeat strong laws like we have in New York. Indeed, in Pennsylvania and Georgia, the payday lending lobby has reportedly used the CFPB’s 2015 blueprint for the rule, suggesting to state legislators that the CFPB has given its stamp of approval to high-cost payday and payday-like loans.
The proposed rule contains a long list of loopholes and exceptions that raise major concerns for our organization. We strongly urge the CFPB, at a minimum, to:
- Require a meaningful “ability to repay” standard that applies to all loans, without exceptions and with no safe harbors or legal immunity for poorly underwritten loans. The “ability to repay” provision should require consideration of both income and expenses, and state that loans that do not meet a meaningful ability to repay standard are per se unfair, unsafe, and unsound. A weak CFPB rule that allows lenders to make unaffordable loans or that includes a safe harbor would not only allow for continued exploitation of people struggling to make ends meet. It would also give payday lenders unwarranted ammunition to knock down existing state protections, as they have been aggressively seeking to do for years.
- Strengthen the enforceability of strong state consumer protection laws, by providing that offering, making, facilitating, servicing, or collecting loans that violate state usury or other consumer protection laws is an unfair, deceptive, and abusive act or practice (UDAAP) under federal law. The CFPB’s success in deploying its UDAAP authority against payday lenders such as CashCall – which a federal court recently found had engaged in UDAAPs by servicing and collecting on loans that were void or uncollectible under state law, and which the borrowers therefore did not owe – as well as against debt collectors, payment processors, and lead generators, provides a strong legal foundation for including this explicit determination in its payday lending rule. By doing so, the CFPB will help ensure the viability and enforceability of the laws that currently protect people in payday loan-free states from illegal lending. At the very least, the CFPB should provide, in accordance with the court’s decision against CashCall, that servicing or collecting on loans that are void or uncollectible under state law are UDAAPs under federal law.
We are deeply concerned that weaknesses in the proposed rule will inevitably be seen as sanctioning high-cost loans that are illegal in New York. A rule that undercuts laws that protect tens of millions of Americans in payday loan-free states does not, in our view, constitute sound public policy-making, even if the rule mitigates some of the harms caused by payday lending in states where it is now legal. Many groups are referring to the proposed rule as addressing the worst abuses of payday lending. Given the agency’s clear mandate, and given all we know about payday lending, why isn’t the CFPB seeking to address all of the abuses of payday lending?
Families in our state—and everywhere—are better off without these high-cost, unaffordable loans. We urge the CFPB to issue the strongest possible rule, without loopholes.
NYS Senator Leroy Comrie
NYS Senator Brad Hoylman
NYS Senator Liz Krueger
NYS Senator Velmanette Montgomery
NYS Senator Gustavo Rivera
NYS Senator James Sanders, Jr.
NYS Senator Daniel Squadron
NYS Assemblymember Charles Barron
NYS Assemblymember Jeffrey Dinowitz
NYS Assemblymember Daniel O’Donnell
NYS Assemblymember Linda B. Rosenthal
NYC Council Progressive Caucus
Manhattan Borough President Gale A. Brewer
NYC Council Member Inez Barron
NYC Council Member Andrew Cohen
NYC Council Member Rafael L. Espinal, Jr.
NYC Council Member Julissa Ferreras-Copeland
NYC Council Member Daniel R. Garodnick
NYC Council Member Vanessa Gibson
NYC Council Member Ben Kallos
NYC Council Member Andy King
NYC Council Member Peter Koo
NYC Council Member Rory I. Lancman
NYC Council Member Brad S. Lander
NYC Council Member Stephen Levin
NYC Council Member Mark Levine
NYC Council Member Alan Maisel
NYC Council Member Carlos Menchaca
NYC Council Member Rosie Mendez
NYC Council Member I. Daneek Miller
NYC Council Member Annabel Palma
NYC Council Member Antonio Reynoso
NYC Council Member Donovan Richards
NYC Council Member Ydanis Rodriguez
NYC Council Member Debi Rose
NYC Council Member Helen Rosenthal
NYC Council Member Ritchie Torres
NYC Council Member Paul A. Vallone
NYC Department of Consumer Affairs
Affordable Housing Partnership
Association for Neighborhood and Housing Development
Bronx Legal Services
Brooklyn Coop Federal Credit Union
Brooklyn Legal Services
Brooklyn Legal Services Corporation A
Brooklyn-Wide Interagency Council of the Aging, Inc. Educational Fund
Buffalo Urban League
Business Center for New Americans
CAMBA Legal Services
Center for NYC Neighborhoods
Central New York Citizens in Action
Common Cause New York
Community Development Corporation of Long Island
Cultural Renaissance for Economic Revitalization
CWA District 1
DC 37 Municipal Employees Legal Services
DRUM – Desis Rising Up & Moving
Ellicott District Community Development, Inc.
Empire Justice Center
Erasmus Neighborhood Federation
Fifth Avenue Committee
First American International Bank
Fordham Law School Feerick Center for Social Justice
Foreclosure Resisters, Inc.
Genesee Cooperative Federal Credit Union
Good Old Lower East Side (GOLES)
Habitat for Humanity New York City
Hebrew Free Loan Society
Housing and Family Services of Greater New York, Inc.
Housing Court Answers
Housing Help, Inc.
Human Development Services of Westchester
JASA/Legal Services for the Elderly
La Fuerza Unida CDC
Legal Services for the Elderly, Disabled or Disadvantaged of WNY
Legal Services NYC
LISC New York City
Long Island Housing Services, Inc.
Lower East Side People’s Federal Credit Union
Manhattan Legal Services
Margert Community Corporation
MFY Legal Services, Inc.
National Center for Law and Economic Justice
Neighborhood Trust Financial Partners
Neighbors Helping Neighbors, Inc.
New Economy Project
New York Communities for Change
New York Legal Assistance Group
New York Public Interest Research Group (NYPIRG)
New York Statewide Senior Action Council, Inc.
NYS CDFI Coalition
PathStone Enterprise Center
Picture the Homeless
Queens Legal Services
Rensselaer County Housing Resources, Inc.
Restaurant Opportunities Center of New York
Retail, Wholesale and Department Store Union (RWDSU)
Rockland Housing Action Coalition
Staten Island Legal Services
Syracuse Cooperative Federal Credit Union
Syracuse United Neighbors
Securities Arbitration and Consumer Law Clinic, Syracuse University College of Law
Teamsters Local 237
The Coalition for Debtor Education
The Financial Clinic
The Legal Aid Society
The SC Group
The Working World
Tompkins County (NY) Workers’ Center
Troy Rehabilitation and Improvement Program
UAW Local 2320
University Neighborhood Housing Program
Urban Homesteading Assistance Board
Washington Heights and Inwood Development Corporation
West Harlem Group Assistance, Inc.
Westchester Residential Opportunities, Inc.
Western New York Council on Occupational Safety and Health
Western New York Law Center
Western New York Worker Center
Westminster Economic Development Initiative, Inc. (WEDI)
 Center for Responsible Lending, “States without Payday and Car-title Lending Save $5 Billion in Fees Annually,” 2016, http://www.responsiblelending.org/sites/default/files/nodes/files/research-publication/crl_payday_fee_savings_jun2016.pdf