But ‘Safe Harbor’ Loophole Dangerously Undermines Other Portions of the Proposal

St. Paul – (March 26, 2015) Today the Consumer Financial Protection Bureau (CFPB) held a field hearing on payday lending in Richmond, Virginia. At the hearing, Director Richard Cordray unveiled a new proposal to regulate the predatory payday lending industry. A coalition of Minnesota faith, consumer, and community groups, including ISAIAH, released this statement about the content of the CFPB’s proposal:

“This proposal takes a major step toward protecting families and their hard-earned money.  The payday lending industry has shown blatant disregard for common sense practices, including basic underwriting. This proposal would make clear that payday lenders are accountable to the same standards as all other lenders.  And it shows that our government can and should ensure that everyday Americans have access to good credit, rather than allowing families to be mired in an endless cycle of debt.”

“This first look at the CFPB’s rules is an opportunity to help organize our communities around payday lending reforms that protect people against poorly underwritten loans, sanctioned repeat refinancing and triple-digit interest rates.”

“Whether you are middle class, poor,  or somewhere in between, nobody should ever have to face the immorality of systemic misery created on the backs of America’s families. Exploiting the working poor with payday lending is an egregious practice that goes against God’s word to help the poor, instead puting a chokehold on some of Minnesota’s most vulnerable families.”

“Although the first half of this proposal shows the invaluable role the CFPB can play in protecting communities, the ‘Safe Harbor’ loophole in the second portion of the proposal reveals what’s at stake when they fail to stand strong.”

“The average payday lender in Minnesota charges on average 273% in annualized interest. Frequently, we see these high-cost loans set as a trap for working families, seniors, low-wage workers, and veterans. The average payday loan borrower is still paying off debt six months after taking out her first payday loan. More than half of all payday loans get renewed or rolled over so many times that the borrower repays twice the amount of the principal. All too often, a borrower’s credit is left in ruins. These loans lead to poverty and undermine the economic independence of Minnesota households. They are a scourge on our community.”