Over the last several weeks, we have shared with you stories of real people who have fallen victim to the underhanded operating practices of payday lenders, caught in a seemingly endless debt trap.
Often, borrowers are just looking to for extra cash to pay off some bills or to fix their car. Such was the case with Ayde’s story. The Idaho mother of three was badly in need of car repairs so she turned to the only place where she knew she could get cash quickly. Ayde took out loans from three different companies ranging from $700 to $1,000. It’s not uncommon for payday loan interest rates to be as high as 400 percent. She has no idea how many times she has had to renew her original loans and she’s still trying to pay them back. Ayde is buried under crippling debt that has led to bankruptcy, closed bank accounts, and harassing phone calls.
Too many veterans, unfortunately, have also fallen victim to unethical payday operating procedures. In our series, we met Joe, an Iraq war combat marine vet who was honorably discharged in 2008. He had fallen on some hard times and needed some cash to buy groceries and some other basic necessities. His initial $200 two-week loan has since been renewed at least five times, though Joe admits he’s not exactly sure of the number. He has paid almost $2,000 in fees.
Even some of the most vulnerable among us are not immune from these unscrupulous operators. Many seniors living on fixed incomes often find themselves in need. People like S. McWilliams turned to a payday lender so she could buy basic groceries that she couldn’t afford on her small allowance. McWilliams initially took out $350. But, because of sneaky and often confusing rules about paying off the debt, she has had to renew her loan a staggering 24 times. McWilliams has paid more than $3,000 in fees. She’s been forced to turn to food banks, local charities, and friends to help her make it through these times. McWilliams is also still trying to pay back that $350 and says she might even have to renew it once more.
Each of the individuals in these stories, and others highlighted in the series, differ in their circumstances, but one common element is that they were completely unprotected from lenders who were only interested in bilking them for as much as possible. In their attempt to pad their bottom lines, payday lenders have wreaked havoc on the financial security in households across the country. That could all be ending, however, with a much-anticipated rule expected from the Consumer Financial Protection Bureau (CFPB). The CFPB is poised to issue a proposed rule on June 2, 2016 that would seriously reign in predatory payday lenders and scale back the scope of their shady lending practices.
NCLR has called on the CFPB to issue a rule that would:
- Make affordability the standard for all loans, without exception. Do not allow loopholes for lenders to choose how they are regulated.
- Require lenders to consider a borrower’s ability to repay before providing a loan.
- Prevent borrowers from taking on too many loans too quickly.
As we close or “Truth in Payday Lending” series, we remain hopeful that the CFPB will put forth a strong rule that will curb payday lenders and keep them from ruining even more lives of vulnerable Americans.