The federal Consumer Financial Protection Bureau betrayed financially vulnerable Americans last week by proposing to gut rules conceived during the Obama era that shield borrowers from predatory loans carrying interest rates of 400 percent or more, according to a New York Times editorial. The bureau’s proposal is based on a legally dubious rationale that will surely be challenged in federal court, according to the editorial. The agency’s abdication of its mandate to protect consumers underscores the need for state usury laws, which have passed in 16 states and offer the surest path to curtailing debt-trap lending. A 2014 bureau study of 12 million similar loans found that over 60 percent went to borrowers who took out seven or more loans in a row. In fact, a majority of loans went to people who renewed so many times that they ended up paying more in fees than the amount of money they originally borrowed. Among those trapped in this debilitating cycle were many people scrimping by on disability income. After years of research, the bureau in 2017 issued sensible regulations governing loans that lasted 45 days or fewer. The cornerstone rule required payday lenders to determine whether the borrower could repay the debt while still meeting living expenses. Read more.
*The views expressed in this editorial are from the publication cited, are meant for informative purposes only, and are not an official position of ABI.