Woodstock Instituted submitted comments to the Consumer Financial Protection Bureau (CFPB) regarding its proposed rule to regulate the prepaid card market. Despite being one of the fastest growing payment types in the country, the industry remains largely unregulated. Woodstock commends the CFPB for proposing strong rules to ensure consumers have access to safe and affordable financial products.
Consumer Financial Protection Bureau
he U.S. Consumer Financial Protection Bureau held a public hearing Thursday as a backdrop for its proposals, which include limits on loan rollovers, freezes on new loans and limits on how lenders tap borrowers' bank accounts. The proposals apply to auto title loans, deposit advances and high-rate installment loans as well as payday loans
Woodstock Institute is part of the Monsignor John Egan Campaign for Payday Loan reform and the Stop the Debt Trap Campaign, which are fighting for an end to abusive lending. In Illinois, short-term payday loans carry a 391 percent annual percentage rate (APR), installment loans carry a 99 percent APR, and car title loans are largely unregulated. Dory Rand, President of Woodstock Institute, made the following statement on the proposal:
Once again, Woodstock Institute, dozens of fellow Illinoisans, and hundreds of colleagues from across the country will descend upon Washington, DC, March 25-28, to learn new skills; visit our elected officials on Capitol Hill; meet with banking, housing, and consumer regulators; and network with new and experienced advocates and industry representatives. Our goal, as always, is to create a just economy. Check out the great time we had at NCRC last year.
Our nation continues to face a student debt crisis, with students and graduates carrying nearly $1.2 trillion in outstanding student loan debt. Balances of student loans have surpassed both auto loans and credit cards, making student loan debt the nation’s largest form of consumer debt outside of mortgages.
According to the Federal student loan website, loans are considered to be in default after 270 days of no payments, if monthly payments are scheduled. When loans are in default, the Department of Education uses debt collection agencies to collect money from borrowers. Debt collectors often garnish the wages of borrowers in default.
We believe the proposed rules are a good start and commend the CFPB for their work. There are ways to make the rules even stronger, but the CFPB needs to hear from advocates for that to happen. Comments are due on March 23, and we urge you to take action now by:
Prepaid cards are one of the fastest growing payment types in the U.S. According to a 2014 study by the PEW Charitable Trusts, consumers loaded over $64 billion onto prepaid cards in 2012, up from $56.8 billion in 2011.
Proponents of raising the threshold argue that small banks, or community banks, would benefit from this change. According to an American Banker article, small bankers believe that the rules intended for big banks are negatively impacting community banks, ultimately impeding their ability to grow. Sen.
Guidance on affordable private student loans
Many student borrowers struggle to repay their loans for a variety of reasons: the jobs they take after graduation don’t pay enough to cover monthly loan payments, sudden illnesses or emergencies put a strain on their finances, or their loans were set up to fail with predatory terms and exorbitant costs.