UnidosUS: CFPB Rule Repeal Makes Millions of Americans Vulnerable to Predatory Lending

WASHINGTON, DC—Today, the Consumer Financial Protection Bureau (CFPB) proposed rescinding provisions of the rule governing certain installment loans, including payday and car title loans. The rule the CFPB proposes to repeal had required lenders take into account consumers’ ability to afford and pay back loans once income and expenses of the potential borrower are calculated.

Payday and car title loans often lock consumers in a debt trap because of their inability to pay back high interest-rate loans that accrue hefty late fees—in the case of payday lending. Consumers who are subject to car title loans that they are unable to afford have zero leverage—the lender simply seizes the vehicle if the consumer fails to pay on time. Both industries have made obscene profits by knowingly lending to consumers they know cannot afford to pay in the long term.

“The auto loan and payday lending industry extract billions of dollars a year from many average- to lower-income Americans, driving many into a cycle of debt that’s extremely difficult to get out of and in cases, even into bankruptcy. Latinos and minority communities are particular targets of these unscrupulous lenders, according to Pew Research. For example, 12 percent of African Americans and 6 percent of Hispanics have taken out a payday loan as compared to 4 percent of White Americans,” said Marisabel Torres, Senior Policy Analyst, UnidosUS.

“The CFPB should be in the business of protecting the rights of consumers and not bending to the payday and car title lending industries who only care about their profits. We urge the CFPB to reconsider rescinding a rule that would have served to protect American consumers from risky financial products,” concluded Torres.