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.
Did you miss the CFPB hearing on payday and other high cost loans? Not to worry, advocates and consumers from around the country testified at the hearing about their experiences with payday and car title loans and we’ve got the highlights below!
1) Ending predatory lending is a top priority of the CFPB and of President Obama: President Obama signaled the importance of putting an end to predatory lending in a speech he gave Thursday in Birmingham, saying, “As Americans, we don’t mind folks making a profit,” Obama said. “But if you’re making that profit by trapping hardworking Americans in a vicious cycle of debt, then you need to find a new business model. You need to find a new way of doing business.”
Watch President Obama’s speech here (payday lending starts at about 15 minutes in):
2) When consumers share their stories about payday and car title loans, it isn’t pretty:
It started with a broken ankle and a $500 payday loan. It ended in a three-year ordeal that cost Elliott – a Marine Corps veteran – his wife, and five daughters more than $30,000 and their house…read more here from the PICO National Network.
From a Guardian article about hearing: “I would tell anyone at this point: don’t do it. Do not do it. If I had known what I know now about payday loans, I never would have looked their way,” he said. The Guardian: Payday loan borrowers: ‘When are we going to be done paying these people?’
Consumers also shared their experiences during the public comment period- below are retweets about the stories:
New Economics For Women shared a consumer story that illustrates how the debt cycle works:
When Lorena (Alias), of Los Angeles, CA, found herself in a tight financial spot, she turned to payday lending….She visited a Speedy Cash location in Los Angeles, CA and borrowed $255, paying $45 in fees and hoping to be able to pay it back in two weeks time….Unfortunately, that was not enough time for her to stabilize her finances, and she had to repeat the loan. She has now repeated the loan 7 times, paying $315 in fees alone….Not only has she had to pay the added $315, she has also acquired overdraft fees. On five occasions, Speedy Cash has taken the money out of her bank account while she was still waiting on disability checks to come in, adding $175 to her expenses, due to payday lending….Hoping to catch up on some of her expenses and be able to get rid of the initial payday debt, she took out a second loan at Speedy Cash for $2,600. However, that loan did not help her at all and has instead dragged her deeper into the cycle of debt. In addition to the repeat loans every two weeks, Lorena now has to pay $38 every two weeks to repay the $2,600 loan. She has fallen behind on her bills and rent and has reached out to family and friends for help. Currently she owes Speedy Cash $2,755 and can only see that amount growing as time goes by.
3. Besides personal stories, research on payday and car title loans has found the products are toxic for the majority of people who use them- pushing them deeper into a cycle of debt.
From a new Pew research report on car title loans:
- Between 6 and 11 percent of title loan borrowers have a car repossessed annually.
- To repay a title loan, 47 percent report using a cash infusion, such as a tax refund.
- 66% of car title borrowers believe the industry should be more regulated.
4. Advocates and practitioners advocate based on the stories and experiences of the people they work with:
Adam Rust, Research Director at Reinvestment Partners, spoke about his organization’s work in housing counseling and providing free tax preparation services. He agreed that they see people facing difficult financial situations, but explained that paydayloans won’t right the ship- instead they’ll only cause people more hardship.
Paulina Gonzalez, executive director of the California Reinvestment Coalition explained in her testimony that “in many of our communities, we need more income, not just credit.”
5. People across the country are concerned about high cost lenders trying to use loopholes to escape regulations- or using cash to wield influence:
6. While the industry tried to play the “we create jobs card” it turns out that’s not true either:
According to a report from the Insight Center for Community Economic Development, the payday loan industry was responsible for a net loss of over 14,000 jobs in 2011, and a net economic loss of over $750 million. Bankruptcies that are triggered by payday loans were responsible for another $169 million net economic loss.
7. States like North Carolina and New York that got rid of payday lenders don’t want them back.
Carlene McNulty, an attorney from the North Carolina Justice Center, commented that North Caorlina had kicked payday lenders out ten years earlier- and the state doesn’t want them back.
8. Communities notice where payday loan companies locate their stores- and where they don’t:
Want to learn more about payday and car title loans? We have a few resources:
1.Over 70 editorials have been written about payday lending- Has your local newspaper written one yet? Take a look: Editorials against payday lending
2. Ever wonder why people are concerned about payday loans and some of the companies that make them? Is it the high interest rates? The debt traps they create for their customers? Their shady collection tactics? The amount of money they spend lobbying state legislators in order to protect their profits instead of their customers? Maybe it’s the extra fees they don’t disclose? All of the above? Check out the Payday Lender Hall of Shame.
3. It’s not just payday loans that can be dangerous to your health- it’s also high cost car title loans and high cost installment loans too: Careful! Alternatives to Payday Loans Can Also Be Predatory
4. Thinking about an online payday loan? Here’s 8 strong reasons not to! (hint: if you don’t like having your identity stolen, steer clear!) 8 Reasons Not to Get an Online Payday Loan