CFPB Proposed Payday Rules Fill California Consumer Protection Void
RULES WILL PROVIDE MUCH NEEDED PROTECTIONS FOR CALIFORNIA CONSUMERS
March 26, 2015—Richmond, VA- Paulina Gonzalez, the executive director of the California Reinvestment Coalition (CRC), will be speaking today at a CFPB field hearing focused on payday lending, during which the CFPB will preview the proposed rules it’s considering for payday, car title, deposit advance and certain high-cost installment and open-end loans.
Gonzalez released the following statement:
“The California Reinvestment Coalition applauds the CFPB’s proposal to provide strong consumer protections for borrowers of high-cost payday and other predatory loans like auto-title loans. For years, our coalition members have advocated for state-level legislative payday lending reforms in California. But every year,industry lobbyists and campaign contributions stymied proposals that could have helped consumers. As we reached a stalemate at the state Capitol, we continued working with major California cities like Sacramento, San Jose, Fresno, and Long Beach to pass local ordinances to address the over-proliferation of payday loan stores invulnerable neighborhoods. We will support and defend the CFPB’s proposals to establish strong, uniform protections for consumers in California and across the country. We are optimistic about the CFPB’s proposal, and we are pleased to see that the CFPB is tackling the major problems with predatory loans including:
-The failure to determine whether borrowers can afford the payments,
Repeatedly rolling over or refinancing absurdly high cost loans so that borrowers cannot escape a debt spiral,
-Holding hostage borrowers’ transportation to work if they cannot afford excessive fees and interest, and
-Abusing the ability to reach into borrowers’ accounts for payment causing multiple overdraft and insufficient funds fees that only further impair borrowers’ ability to meet their financial obligations.
The CFPB’s draft proposal strikes the right balance by providing both lenders and borrowers with options. CRC strongly supports requiring all lenders to either assess a prospective borrower’s ability to repay the loan, or to abide by certain restrictions that ensure borrowers will be able to pay off the debt without it spiraling out of control. We believe that a loan should help provide a bridge for families to meet their financial needs—not create greater financial hardships that result in difficult choices such as keeping the lights on or re-borrowing another high-cost loan.
CRC strongly supports the CFPB’s proposal to require all lenders to give borrowers three business days’ notice before seeking payment through a borrower’s bank account, and to stop doing so after two failed attempts.This measure will provide borrowers enough time to ensure they have sufficient money in their account to prevent escalating overdraft and insufficient funds fees that drive them deeper into debt.”
Michael Lake, a former payday loan consumer from San Diego, added “I got caught in a vicious cycle of payday loan debt for over two years, paying almost $6,500 in interest and fees. I had six simultaneous payday loans, and not one of the six lenders ever looked at my monthly expenses or other debts.This situation created so much stress for me, I almost lost my apartment because all my money was going to pay off these loans. These lenders really need to consider what borrowers can actually afford to repay. Otherwise millions of people across the country will continue to suffer the same financial heartaches as I did.”
A copy of Paulina’s testimony is available here.