Release date: 5/16/2019
(RALEIGH) Attorney General Josh Stein today urged the Consumer Financial Protection Bureau (CFPB) to keep protections in place that safeguard consumers from abusive payday and vehicle title loans. The proposed rollback of these protections would allow lenders to prey on vulnerable consumers, undercut states’ efforts to protect their residents, and go against the CFPB’s legal obligation to protect consumers from unfair and abusive practices.
“In North Carolina, we ran out payday lenders who were violating the law and using loan shark interest rates to hurt people,” said Attorney General Josh Stein. “I urge the CFPB to keep these protections in place to protect consumers from these abusive loans and cycles of debt.”
Payday and vehicle title loans are often marketed to consumers in desperate financial and life circumstances. Payday loans are high-interest, short-term loans that must be paid in full when the borrower receives their next paycheck. The average payday borrower is in debt for nearly half the year because they borrow again to help repay the original loan, trapping these borrowers in an endless cycle of debt. Vehicle title loans are similar to payday loans, but they also require borrowers to guarantee a loan with their car or truck title. This means that if a borrower defaults, the lender can seize their vehicle.
In 2017, the CFPB finalized a rule that required lenders to determine in advance whether consumers have the ability to repay loans that are due all at once, capped the number of consecutive short-term loans lenders can make to the same consumer at three, and preserved access to less-risky short-term loans that allowed consumers to pay off debt over time. While the rule went into effect in early 2018, compliance was delayed until August 19, 2019, to give lenders time to develop systems and policies. Now, less than 18 months after the rule was adopted, the Trump administration is attempting to rescind it. In March, Attorney General Stein led the same coalition of 25 states in opposing a separate attempt by the CFPB to further delay implementation of the rule.
Attorney General Stein is joined in sending this letter by the Attorneys General of California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, Wisconsin, and the District of Columbia.
A copy of the letter is available here.
A summary of the 2017 payday lending rule is available here.
Laura Brewer (919) 716-6484