Rein In Risky Payday Loans And Protect Working Families
- by: The Pew Charitable Trusts
- recipient: Director Richard Cordray, CFPB
Today, 12 million Americans use payday loans and spend almost $9 billion in fees. These loans often have a two-week pay period – an extremely difficult goal for people already struggling to make ends meet.
The Consumer Financial Protection Bureau (CFPB) recently released a proposed rule to address the harms of high-cost small loans, such as payday and auto title loans.
Payday loans have APRs of around 400 percent and loan payments that take up one-third of the average borrower's next paycheck. The Bureau has a chance to curb harmful features of these loans and encourage safe, affordable lending through banks and credit unions. But without your help, it may miss this historic opportunity.
Take action today and urge the CFPB to protect consumers from 400 percent APR loans and implement product safety standards that would save borrowers billions of dollars.
The Consumer Financial Protection Bureau (CFPB) recently released a proposed rule to address the harms of high-cost small loans, such as payday and auto title loans.
Payday loans have APRs of around 400 percent and loan payments that take up one-third of the average borrower's next paycheck. The Bureau has a chance to curb harmful features of these loans and encourage safe, affordable lending through banks and credit unions. But without your help, it may miss this historic opportunity.
Take action today and urge the CFPB to protect consumers from 400 percent APR loans and implement product safety standards that would save borrowers billions of dollars.
Subject: Docket No. CFPB-2016-0025
Dear Director Cordray,
Thank you for working to improve the lives of borrowers around the country by addressing the harms in the payday loan market. I appreciate the opportunity to comment on this rule and encourage the CFPB to make sure the loans are safe and affordable in order to protect borrowers.
Payday loans have harmed borrowers for the past 25 years. The loans have rates averaging 400 percent and Americans spend almost $9 billion on payday loan fees annually. Repaying a loan in just two weeks is difficult for people struggling to make ends meet. The CFPB's proposal will lead to fewer two-week payday loans and encourage more installment loans that are repaid over time, which is good. But the rule also heavily relies on lenders to underwrite the loans using vague information, and does not provide guidelines for how much loans should cost or how long they should last once underwritten. High-cost installment loans can be harmful and underwriting alone is not a fix.
However, if done right, this rule can help make small loans work better for people. They should function like other types of credit such as mortgages and student loans, where the balance declines with every payment and borrowers are able to repay their loans in affordable installments over time. Loan payments should be limited to an affordable percentage of a borrower's paycheck to ensure they can repay their loan while meeting other financial obligations.
The best way to ensure that safe and affordable small loans are available would be to encourage banks and credit unions to offer them at lower prices. This would save payday loan borrowers billions of dollars per year, but right now, the proposal does not offer a pathway for these institutions to develop better products at lower prices.
I urge the CFPB to add product safety standards to its proposal, including limiting installment payments to an affordable share of a borrower's paycheck, such as 5 percent; requiring that lenders give borrowers between 46 days and six months to repay their loans, and prohibiting origination fees. Simple and clear limits like these would better protect consumers, enable access to lower-cost credit, and save millions of borrowers billions of dollars each year.
[Your Comments]
Thank you,
[Your Name]
Sign PetitionSign PetitionDear Director Cordray,
Thank you for working to improve the lives of borrowers around the country by addressing the harms in the payday loan market. I appreciate the opportunity to comment on this rule and encourage the CFPB to make sure the loans are safe and affordable in order to protect borrowers.
Payday loans have harmed borrowers for the past 25 years. The loans have rates averaging 400 percent and Americans spend almost $9 billion on payday loan fees annually. Repaying a loan in just two weeks is difficult for people struggling to make ends meet. The CFPB's proposal will lead to fewer two-week payday loans and encourage more installment loans that are repaid over time, which is good. But the rule also heavily relies on lenders to underwrite the loans using vague information, and does not provide guidelines for how much loans should cost or how long they should last once underwritten. High-cost installment loans can be harmful and underwriting alone is not a fix.
However, if done right, this rule can help make small loans work better for people. They should function like other types of credit such as mortgages and student loans, where the balance declines with every payment and borrowers are able to repay their loans in affordable installments over time. Loan payments should be limited to an affordable percentage of a borrower's paycheck to ensure they can repay their loan while meeting other financial obligations.
The best way to ensure that safe and affordable small loans are available would be to encourage banks and credit unions to offer them at lower prices. This would save payday loan borrowers billions of dollars per year, but right now, the proposal does not offer a pathway for these institutions to develop better products at lower prices.
I urge the CFPB to add product safety standards to its proposal, including limiting installment payments to an affordable share of a borrower's paycheck, such as 5 percent; requiring that lenders give borrowers between 46 days and six months to repay their loans, and prohibiting origination fees. Simple and clear limits like these would better protect consumers, enable access to lower-cost credit, and save millions of borrowers billions of dollars each year.
[Your Comments]
Thank you,
[Your Name]
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