The leaders of four liberal and minority Congressional caucuses have written to Director Cordray to urge the CFPB to adopt “strong protections” for payday loans. The letter was signed by the co-chairs of the Congressional Progressive Caucus and the chairs of the Congressional Hispanic Caucus, Congressional Black Caucus, and Congressional Asian Pacific American Caucus.
The caucuses want the CFPB to adopt rules for storefront and online payday loans that include the following:
- An ability to repay standard that requires a lender to consider the borrower’s income and expenses
- A prohibition on any series of repeat loans
- A restriction on providing additional payday loans to a borrower who has had payday loans outstanding for a specified period that is no longer than 90 days in a 12-month period
- A prohibition on the use of post-dated checks or electronic access to a borrower’s checking account as evidence of ability to repay
We recently wrote about two studies that cast serious doubt on the benefit to payday loan borrowers of ability-to-repay requirements and rollover limits. (A third study questions the value of a payment-to-paycheck ratio ceiling, another payday loan limit thought to be under consideration by the CFPB and advocated by certain consumer groups.) As it considers the caucuses’ request and similar requests from other proponents of such payday loan requirements and limits, we continue to hope that the CFPB will look carefully at these studies in developing a payday loan rule.