We are deeply disappointed in a decision this week by the Consumer Financial Protection Bureau (CFPB) to rescind rules that would have protected consumers from predatory lenders.
The rules were modest in scope – requiring payday and car title lenders to first assess a borrower’s ability to repay the loan.
Instead of protecting consumers, rescinding the provisions of the agency’s 2017 payday and car-title lending rule would help predatory lenders continue to trap vulnerable people in debt.
As part of the rulemaking process, the CFPB undertook years of study of the industry before requiring lenders to consider a borrower’s ability to repay. The CFPB is now unraveling those protections, leaving people vulnerable to predatory lending practices and debt traps.
Payday and car-title loans charge abusive fees that cost Alabama families more money than they can afford. The Alabama State Banking Department’s database shows that borrowers who take these loans are often unable to escape the debt trap, with half of all them taking seven or more payday loans per year.
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.
This endless cycle of debt has to end.
We strongly urge the CFPB to reconsider its decision to rescind this important protection for borrowers, and we call on the Alabama Legislature to – once and for all – protect Alabamians from these abusive practices.