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Today, the Consumer Financial Protection Bureau (CFPB) released its draft high cost small dollar lending (payday and auto title) loan rule for public comment. The following statement can be attributed to PIRG National Consumer Program Advocate Mike Litt.
“Today, the CFPB unveiled a groundbreaking proposal for a new national rule on payday and car title lending that has the potential to save consumers nationwide billions of dollars in unfair fees and interest. The rule will be most effective only if changes are made before it is finalized. It is a good beginning, but there is still much work to be done to ensure this rule truly protects consumers from the legalized loan sharks who prey on our communities in many states. PIRG will be urging its members to help the CFPB understand the importance of closing loopholes – such as a provision allowing up to six loans in a year with no ability-to-repay assessment -- in what is otherwise a well-thought out proposal. In doing so, they can shut the debt trap once and for all.
While the rule dramatically ratchets up protections for consumers where payday loans are allowed, ninety million Americans already live in states that effectively ban payday lending. We urge the CFPB to issue a strong final rule that bolsters, and does not undermine, those states’ protections, including by requiring an ability-to-repay assessment across the board and by declaring any violation of state usury and other consumer protection laws an unfair, deceptive, and abusive act or practice.”
PIRGs are non-profit, non-partisan public interest organizations that take on powerful interests on behalf of their members around the country. PIRGs are founding members of the Americans for Financial Reform coalition. Its “Stop the Debt Trap” campaign includes a more detailed analysis of what works and what doesn’t about the CFPB’s proposal.
The CFPB will be seeking comments from the public until September 14, 2016, after which they will review before making the rule final in 2017. In the meantime, consumers are encouraged to comment and suggest changes to the final rule that will close loopholes and remove exemptions. Comments can be submitted here.
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