Sen. Brown, advocates call for strong payday lending reforms
Posted July 20, 2015 in Press Releases
Five years after creation of Consumer Financial Protection Bureau, rules are still needed to curb payday lending abuses.
Contact: Kalitha Williams, 614.221.4505
Five years after the Consumer Financial Protection Bureau was created as part of the Dodd-Frank financial reform law, consumer activists are encouraging the federal agency to curb abuses of the payday lending industry.U.S. Senator Sherrod Brown, Policy Matters Ohio, Ohio Poverty Law Center and Neighborhood Housing Services of Cleveland are celebrating this important milestone and the work of the CFPB, but called for stronger efforts to protect consumers.
“Until Congress established the CFPB, there was no federal watchdog responsible for supervising lenders and enforcing regulations in the payday loan market,” said Senator Brown. “Since its creation, the CFPB has returned $10.1 billion to the pockets of 17 million wronged consumers. But too many Ohioans are still trapped with a lifetime of debt after taking out payday loans. And for too long, the payday lending industry has dodged rules that would protect consumers. I will continue pushing the CFPB to develop the strongest rules possible to crack down on payday lenders who prey on Ohio families when they are at their most vulnerable.”
Senator Brown is one of 101 congressional signers (68 House members and 33 Senators) of letters urging the CFPB to move forward with rules strong and broad enough to end the abusive practices of payday, car-title and other high-cost consumer lenders. Strong rules will keep Americans from getting trapped in the cycle of debt that is too often the result of these triple-digit-interest loans and unaffordable balloon payments.
“Ohioans have been under the thumb of payday lenders for far too long,” said Kalitha Williams, Policy Liaison of Policy Matters Ohio. “One in 10 Ohioans has taken out a payday loan. With interest rates of 600 percent or more, it’s no wonder we have the third-highest number of consumer complaints to the CFPB on payday loans. Ohioans need the CFPB to break through with a strong rule that will protect them from the debt trap.”
Ohio has a muddled history in trying to regulate payday lenders. In 2008, the Ohio General Assembly and Ohio voters, through legislation and a statewide ballot initiative, decided to curb payday lending by creating the Ohio Short-Term Loan Act. Last year, the Ohio Supreme Court upheld a loophole in state law allowing payday lenders to operate outside the limits established by the General Assembly and backed by the state's voters. The CFPB has an opportunity to step in where state policymakers have been unsuccessful.
“The booming payday industry in Ohio has opened the door to car title lending," said Linda Cook of the Ohio Poverty Law Center. “These loans put vulnerable consumers even more at risk because one late payment means a family losing their only transportation to work, school and medical appointments.”
She said Ohio and the nation need reform and regulation of the lenders who use Ohio to profit from short-term, small-dollar loans. “Low-income Ohioans deserve access to credit that is affordable and doesn’t take advantage of their difficult financial position and Ohio’s challenging economic times. We applaud the CFPB for the work it has done so far to help make the marketplace fair for consumers, and we look forward to strong rules for payday.”
Payday lenders claim to be offering a one-time financial quick fix. In truth, their business model is to make loans they know cannot be paid back in full and on time