The rule, which was years in the making, created vital protections for consumers of payday, car title, and some longer-term loans to ensure that predatory lenders don’t trap customers in unaffordable loans. Underlying the rule is the common-sense principle that lenders should consider whether borrowers have the ability to repay a loan before they risk their financial well-being.
For its Head of Consumer Protection, the FTC chose a lawyer, Andrew Smith, who worked for both payday lenders and Equifax. The FTC needs a someone with a record of consumer protection, not yet another industry lawyer
“Deposit advance” loans are payday loans, pure and simple, and data clearly show they create the same debt trap caused by non-bank payday loans. High-cost longer-term loans facilitated by banks and credit unions would also cause customers substantial harm. We also urge you to ensure that all financial institutions engaged in small dollar lending (1) limit interest rates to 36% or less, and (2) determine borrowers’ ability to repay their loans by assessing both income and expenses rather than engaging in collateral-based income-only underwriting.”
“In 2013, the FDIC and OCC issued guidance aimed at curbing the harms of these debt trap loans. At the same time, the Federal Reserve issued a supervisory statement to the same end… But today, banks are attacking the FDIC and OCC protections that have prevented banks from trapping people in unaffordable payday loans.”
We write to ask for the bank’s pledge that it will not begin making payday loans, and that it will oppose the
rollback of the regulatory guidance, which would make it easier for other banks to do so.
“State laws often operate as the primary line of defense for consumers and small businesses; thus, the proposal puts them at great risk. The OCC must not undermine state rate caps. Interest rate caps are the simplest, most effective way to protect borrowers from unaffordable, high-rate loans and to align the interests of lenders and borrowers.”
At a CFPB hearing in Richmond, Va., AFR delivered a letter in which a remarkable array of civil rights, faith, economic justice, elder, community and civic organizations – 500 altogether, including groups from all 50 states – applaud the CFPB for its commitment to this issue and urge it to develop and implement regulations that finally put payday, car-title and other small-dollar lenders “on the same footing as other lenders, requiring them to play by the rules and make fair loans.”
AFR joined the National Consumer Law Center, Consumer Federation of America, the Center for Responsible Lending, and 26 other consumer and civil rights groups call for stronger measures to stop banks and payment processors from helping internet and tribal payday lenders collect illegal payments from consumers’ bank accounts.
OCC is asked to downgrade the bank over its Direct Deposit Advance loan product.