Short-term “payday day” loans can be a life-saver to American workers and families by providing needed cash in between paychecks for emergencies.
The Consumer Financial Protection Bureau (CFPB) passed rules that would severely curtail payday loans including testing whether customers can repay the loan and fees and preventing lenders from debiting customer checking accounts if they can’t collect on the loans.
The new regulations would make dry up the small-dollar loan industry leaving millions of Americans without an important source of emergency cash. Their need for credit won’t disappear either, but they may turn to other more costly sources of cash or default on financial obligations.
Despite comments and objections, including tens of thousands of handwritten notes from customers, the CFPB is charging ahead with this rule.
Congress has a chance to block these regulations from going into effect though.
IWV has joined a coalition of groups urging Congress to use the Congressional Review Act to stop the CFPB rule. As noted in the letter:
Put forward under the guise of consumer protection, the rule would strip valued financial services away from some of the most vulnerable people in society.
According to the CFPB’s own analysis, the rule is expected to reduce industry revenue by 75 percent. The industry predicts that could render up to 80 percent of all lenders unprofitable. For the 12 million consumers who rely on these loans, at least $11 billion worth of credit will be eliminated.
Americans need more access to capital, not Washington regulators determining what’s good for them.
Congress has a chance to right a wrong by the CFPB before it inflicts hardship on consumers. We hope they take it.