CFPB Puts Forth Historic Proposal to End the Payday Debt Trap
(CHICAGO, ILLINOIS) _ Earlier today the Consumer Financial Protection Bureau (CFPB) released a working draft of a proposal to rein in abusive low-dollar lending schemes such as payday, auto title and installment lending. The draft, presented at a field hearing in Richmond, VA, would require lenders to verify before making a loan that borrowers can pay it back on time, without re-borrowing, and still cover their basic necessities like rent, food and utilities.
“While the recommendations of the CFPB are a good first step, we know from experience in Illinois that the payday lenders love to find loopholes, some of which are contained in the CFPB proposal. As we move down the path of federal regulation of small dollar loans it is imperative to create a structure that lenders will not be able to work around. If we don’t take care of potential loopholes at the front end we end up playing a game of whack a mole, where we knock down one bad consumer practice and another pops up at the other end”, said Lynda DeLaforgue, co-director, Citizen Action/Illinois.
“We urge the CFPB to pass a comprehensive ability to repay policy for small dollar loans. Without this the lenders will continue to keep consumers coming back in the door with money in their hands for as long as they possibly can,” DeLaforgue concluded.
Citizen Action/Illinois is the key convener of the Monsignor John Egan Campaign for Payday Loan Reform. The campaign began in 1999, shortly after a poor woman came to confession at Holy Name Cathedral and spoke tearfully of her experience with payday loans. Monsignor John Egan assisted the woman in paying off both the loans and the interest, but his outrage towards the unscrupulous lenders had only begun. He immediately began calling friends, organizations, and associates to try to challenge this contemporary usury. Shortly after his death in 2001, the coalition he helped to create was renamed the Monsignor John Egan Campaign for Payday Loan Reform.