By Equal Voice Action
Photo: Taber Andrew Bain CC BY 2.0
Continuing our push to protect poor families from predatory lending, Equal Voice Action joined an Illinois-based delegation in late November to meet with legislators on Capitol Hill in Washington D.C. and advocate for the continued defense of the Payday Loans Rule.
Drawing on data-driven analysis as well as extensive public comment, the Consumer Financial Protection Bureau (CFPB) implemented the Payday Loans Rule rule in 2017 to address the devastating impact that short-term, high-interest loans have on U.S. households.
Poor families, who have zero cushion in their budget to address unexpected expenses, are particularly vulnerable to exploitation from payday lenders. These lenders promise short-term advances but often entrap borrowers in a long-term cycle of debt through high-interest loans—often upward of 300 percent. Through these and other predatory tactics, payday loans do not relieve poverty—they entrench it.
The Payday Loans Rule requires lenders to reasonably and realistically determine the borrower’s ability to pay back a loan within the loan period without sacrificing the ability to meet basic living expenses and other major financial obligations—and without having to re-borrow within 30 days of having paid back the loan.
This common-sense standard is vital for ensuring that such loans are actually short-term, realistically repayable, and not an added financial burden for families who are already struggling.
However, under the Trump administration, the CFPB is planning to reopen the rule, with the agenda of undoing the important ability-to-repay standard set for short-term lenders. This would essentially tear out the heart of the borrower protections in the current rule, and once again heighten the exposure of poor and low-income families to predatory lending.
Equal Voice Action joined partners from the Woodstock Institute and Illinois PIRG to call on congressional legislators to push back against this potential rollback of borrower protections.
Our message to legislators: payday loans are not a lifeline; they are a huge millstone around the necks of poor families. They are not “access to credit” as people in the industry say; they are invitations to financial ruin for poor families.
EVA Executive Director David Luna (left) joined Jenna Severson (Woodstock Institute), Abe Scarr (Illinois PIRG), and Brent Adams (Woodstock Institute) in advocating for strong regulations on payday loans while meeting with Illinois Congressman Rodney Davis (second from right), and other legislators, on a visit to Capitol Hill in November 2018.
Equal Voice Action also advocated for a national 36% Rate Cap Bill, which would greatly reduce interest rates for short-term borrowers while still allowing lenders to make reasonable profits. This regulation, already active in 16 states and the District of Columbia, would provide families even greater protection against the crushing effects of payday loans.
EVA and our delegation partners also called on legislators to defend the Military Lending Act, which protects the people who put their lives on the line for us from predatory lending practices, including extremely high-interest loans.
The bottom line for all of these regulations is that they protect U.S. households from predatory lending practices that exploit and hurt families, and entrench poverty in our communities.
We need a loan industry that does not target poor families for unchecked profit. We need fair lending practices that enable poor and low-income families to access credit to address not only their emergency needs but opportunities to build wealth.
To reopen the Payday Loans Rule, the CFPB will be required to open up a period of public comment on the proposed changes. Stay tuned for the opportunity to speak out against this proposed change to undo important protections for poor and low-income families.
For more information, view the following resources:
Illinois Delegation Payday Loan Fact Sheet via the Woodstock Institute
Equal Voice Action Joins Advocacy Effort to Protect Families from Predatory Lending