The Consumer Financial Protection Bureau today unveiled its long-awaited rule against short term “payday” loans. CEI Senior Fellow John Berlau criticized the new rule, warning it will do more harm than good.
“The CFPB’s new rule against short-term lending, including ‘payday loans,’ will do more to stop people from getting urgently needed funds than it will to help consumers avoid prolonged debt. Imposing a new ‘ability to repay’ standard is wholly inappropriate for small-dollar loans, because if borrowers truly had an immediate ‘ability to repay,’ they would most likely use a credit card instead of getting a loan.
“The CFPB says it will provide some exemptions for short-term loans provided by credit unions and community banks, but it remains to be seen if those exemptions will be workable given the rule’s other restrictions.”
Consumers have said in multiple surveys that they were satisfied with their loan products, and they reported repayment difficulties only in a small minority of cases. We have argued that the CFPB could simply have issued rules improving disclosure instead of limiting options for lower-income consumers and people who need cash in emergency circumstances.
- CEI report: Ending Payday Lending Would Harm Consumers
- CEI Comments to the CFPB on Harmful Payday Loan Rule
- CEI lawsuit challenging CFPB constitutionality, State National Bank of Big Spring v. CFPB