While it was obvious to Holly Petraeus, Assistant Director for the Office of Servicemember Affairs, and others who visit areas near military bases that high-cost, predatory lenders were preying on vulnerable service members and their families.
Payday loans often trap consumers in a cycle of debt due to lump sum payments, high annual percentage rates (APR), and little consideration of whether borrowers can afford to repay their loans. To combat this, the CFPB is developing new rules for payday loans. In an initial outline of the proposed rules, the CFPB proposed to require that lenders verify a borrower’s ability to pay back a loan while still covering basic necessities and existing debts, among other protections.
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:
Sen. Durbin’s proposed bill:
The campaign, headed by National People’s Action and supported by Woodstock Institute, took over the #SharkWeek hashtag by highlighting different payday lenders and encouraging loan shark survivors to share their stories.
If done right, the national regulations could ensure that consumers will be protected from payday lenders' worst practices, regardless of where they take out a loan.
But if regulators miss the opportunity to create comprehensive rules, lenders could continue exploiting loopholes and trapping borrowers in a long-term cycle of debt. The Consumer Financial Protection Bureau needs to ensure that this doesn't happen.
More good news keeps coming for consumers in early 2014. On the heels of new mortgage rules that took effect January 10, the following week four banks making payday loans pulled their products from the market. Announcing a halt to their triple-digit interest rates were Wells Fargo, Regions, Fifth Third and US Bank.
Together, these lenders have combined assets of $2.1 trillion, serving customers through 30,000 branches and more than 21,500 ATMs across the country.