Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.
BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.
PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.
The dangers of payday lending has captured the national spotlight, thanks to initiatives like Operation ChokePoint that are cutting off the enablers of illegal online payday loans, research from the Consumer Financial Protection Bureau that demonstrates the “debt trap” faced by the great majority of payday loan customers, and investigations and enforcement actions against payday lenders by the CFPB and other regulators.
While the CFPB is expected to start the rule-making process to regulate payday lenders this year, it’s important that consumers know that other lenders can be just as dangerous to your financial health- including car title loans, pawn shops, and rent-to-own stores.
We’ll be updating this post with stories about loans that are similar to payday loans, with high interest charges, short payback terms, and other loan features that hurt, rather than help consumers.
Alternatives to Payday Loans can also be Predatory
4. “I look at title lending as legalized car thievery,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento advocacy group. “What they want to do is get you into a loan where you just keep paying, paying, paying, and at the end of the day, they take your car.” LA Times: “More auto title lenders are snagging unwary borrowers in cycle of debt”
3. An examination of consumer complaints to state regulators about TMX and its InstaLoan stores shows that the customers are often teetering on the edge. One Floridian appears to have renewed her loan 17 times in 1 1/2 years. Another woman borrowed $3,100 and made $2,600 in payments, but after rolling her loan over seven times she still owed $3,900. Rather than keep paying, she surrendered her car to InstaLoan. A third customer had $886 in monthly income, according to her loan application. Just to renew her $3,000 loan would have required more than a third of her income. Rather than pay it, she, too, surrendered her car.
“I am 59 years old and disabled, and on a fixed income. I am unable to make such payments and they are threatening to repo my vehicle next week,” wrote a Pensacola woman. Insta-Loophole: In Florida, High-Cost Lender Skirts the Law (Paul Kiel, Propublica, July 25, 2014)
2. In Mesa, the city’s older, heavily Hispanic west side has seen a swarm of auto-title lenders. Moving east toward traditionally higher-income areas, the number of title-lending locations drops off sharply. “They look for cheap real estate or cheap rental space,” Mesa Councilman Dennis Kavanaugh said. “From a development perspective, I am unaware of any beneficial impact in any location they operate in. … They suck money out of a community and rarely, if ever, give back to the community in any way.” Quick loans, or quicksand? Title lenders spread across SEV (Maria Polletta, The Republic, June 29, 2014)