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Payday Lending Rule Could Be Gutted As Feds Propose Changes

37 States Have Banned The Triple Digit Interest Rates Common On Pay Day Loans

February 07, 2019 - 2:22 pm

CARSON CITY, NV (KXNT) - The Consumer Financial Protection Bureau is proposing to revise its own Payday Lending Rule to no longer require lenders to verify that the borrower has the means to repay the loan.

A Day after President Trump's State of the Union address, where he called for expanding the middle class, his consumer agency said it wants to gut key protections that keep people from sliding deeper into poverty. The Consumer Financial Protection Bureau proposed revisions to the payday lending rule, so lenders no longer have to verify the borrower's ability to repay a loan without renewing it. Suzanne Martindale with Consumer Reports said this is a betrayal of the bureau's core mission.

"This really does send a message that this agency that is tasked with protecting consumers would rather instead leave everything open and allow lenders to do whatever they see fit," said Martindale.

37 states have banned the triple-digit interest rates common in many payday and car-title loans. In Nevada, interest rates on short-term loans have no limit. The bureau ceased to be an independent agency once President Trump gained the right to appoint the director. Since then, it put the payday rule on hold and then settled multiple exploitation cases against payday lenders with small fines. The administration argues that the change will allow the industry to expand and offer credit to additional need consumers.

Martindale said predatory lenders profit by bleeding desperate consumers dry.

"Not all credit is created equal, and it is important to ensure that we are not enabling a marketplace that allows lenders to stick people in debt they can't get out of and that could very likely leave them worse off than before they borrowed," Martindale said.

Research shows that 4 out of 5 consumers of payday loans have to re-borrow at the end of the loan's term. With auto title loans, 1 in 5 borrowers loses the car to repossession.