CFPB Is Required To Consider Comments On Its Plan, Which Would Eliminate Protections From Payday Loan Debt Traps

Americans for Financial Reform Education Fund, as part of a coalition of civil rights, consumer, and labor groups, submitted an official comment letter to the Consumer Financial Protection Bureau excoriating CFPB Director Kathy Kraninger’s proposal to gut a 2017 rule that was issued to stop payday loan debt traps. The coalition’s comment letter, submitted on the last day of the comment period, is a comprehensive rebuttal to Kraninger’s rationales for rolling back consumer protections on payday loans.

The letter details how the proposal fails to account for ample evidence of consumer harm of these 300 percent+ APR loans and abandons the CFPB’s core mission. Select quotes from the comment are included below. Click here for the coalition’s comment letter in its entirety.

“The payday rule, finalized in 2017, would have been a major safeguard against payday and car-title debt traps,” said Lisa Donner, executive director of AFR EF. “Now, the CFPB has proposed to gut the rule, even though they acknowledge that people would save billions of dollars in fees and interest if the rule went into effect, and that they have no new research to back up the change. It is both deeply wrong and a betrayal of the agency’s consumer protection mission to put predatory lenders’ bottom lines ahead of standing up for economically vulnerable families.”

The proposal would rip out the heart of the 2017 payday rule, the commonsense requirement that a lender checks to see if a borrower could repay a loan before issuing it (an “ability-to-repay” standard).

Along with Americans for Financial Reform Education Fund, signatories to the letter are: Public Citizen, National Consumer Law Center, Consumer Federation of America, American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), Center for Responsible Lending, The Leadership Conference on Civil and Human Rights, League of United Latin American Citizens (LULAC), NAACP, National Association for Latino Community Asset Builders, National Coalition for Asian Pacific American Community Development (National CAPACD), U.S. PIRG.

The comment letter states:


“The Bureau spent over five years engaging in an extensive information gathering, public input and analysis before finalizing a rule to address the unfair and abusive practice by payday and vehicle title lenders of making loans without considering ability to repay…

“The Proposal—a plainly outcome-driven, 47-page exercise in grasping for straws—has offered no reasonable basis to rescind that Rule.

“The Proposal never disputes the harms of the debt trap. But the Proposal,without basis, would permit those harms to continue. Payday and title lenders’ practice of making loans without considering ability to repay causes serious and widespread harm. Payday and vehicle title lenders turn responsible lending on its head, creating a debt trap by design that is the core element of their business model. The overwhelming majority of payday and auto vehicle loans are made to borrowers caught in a debt trap because they cannot afford to repay their loans on their initial terms…

“And lenders’ unfair and abusive practice causes particular harm to financially vulnerable communities, including older Americans, those on a fixed income, and communities of color..

“The Proposal abandons the Bureau’s core statutory mission of protecting consumers and shows an almost exclusive focus on the interests of payday and vehicle title lenders.”