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U.S. House to vote on bill that would eliminate proposed predatory loan protections

The U.S. House of Representatives is expected to vote this week on a bill that would stop the Consumer Financial Protection Bureau’s (CFPB) years-long effort to rein in predatory lenders who profit by trapping the poor in an endless cycle of debt.

Last June, the CFPB proposed rules that would for the first time impose national standards on an industry that drains nearly $8 billion in fees each year from the most financially vulnerable Americans.

The proposed rules are modest in scope – requiring payday and car title lenders to assess a borrower’s ability to pay – but they represent a first step in stopping the industry’s worst abuses.

The CFPB has also enforced existing laws that prohibit some predatory practices, such as overcharging borrowers, using illegal debt collection tactics, and pressuring borrowers into debt traps.

The bill before the House would entirely eliminate the Bureau’s authority to regulate this industry. The provision is part of the larger Financial CHOICE Act, which is intended to gut the 2010 Dodd-Frank law that was enacted to reform Wall Street abuses in response to the 2008 financial crisis.

The Dodd-Frank law created the CFPB and gave it the authority to protect consumers from unfair, deceptive or abusive financial products and services.

Predatory loans are devastating to low-income communities. Millions of economically disadvantaged people fall deeper and deeper into a nightmare of debt after taking out payday and car title loans to pay for food, rent, utility bills or other basic needs.

Last year, in comments to the CFPB, we focused on the problem in Alabama, one of the poorest states, where lenders charge annual interest rates of 456% for payday loans and 300% for title loans. When borrowers can’t repay the principal in a two-week or one-month period, lenders typically offer to roll it over into a new loan. Consumers can make payments for months, often paying only the interest and ending up owing more than they can pay back.

The latest data in Alabama showed that, on average, borrowers who took out these loans were trapped in debt for 168 days.

In our 2013 report, we spoke with the owner of a payday loan store who told us bluntly, “To be honest, it’s an entrapment – it’s to trap you.”

This is an industry that must be regulated to protect America’s most vulnerable people. We cannot allow rollbacks to important consumer protections and to the authority of the CFPB to prevent and remedy the abuses that harm consumers across the country.


Sara Zampierin is a senior staff attorney.

For more information about the abuses of predatory lenders, see Easy Money, Impossible Debt: How Predatory Lending Traps Alabama’s Poor.