25 states oppose proposals backtracking on borrower protections
DES MOINES — Attorney General Tom Miller urged the Consumer Financial Protection Bureau to take immediate action to protect consumers from abuses in payday lending, vehicle title lending, and other types of high-cost exploitative consumer lending. Iowa is part of a coalition of 25 states filing comments with the bureau.
"The delay in the protections will leave consumers unprotected from many types of exploitative loans, and it could embolden lenders who would seek to circumvent the laws," Miller said.
In 2017, CFPB announced a new rule that would help protect borrowers and ensure they’d have the ability to repay loans while also prohibiting lenders from using abusive tactics when seeking repayment. The rule went into effect in early 2018, but compliance was delayed to Aug. 19, 2019, to give lenders time to develop systems and policies. CFPB has now proposed to further delay compliance to Nov. 19, 2020, more than three years after the regulation was finalized. At the same time, CFPB is reviewing another rule that would altogether rescind this one.
Together, these actions would put at risk hard-fought borrower protections. In their comments, the attorneys general cite CFPB’s own findings that demonstrate the many ways the short-term payday and title lending model is broken — specifically as a significant percentage of these loans are expected to fail. In fact, 90 percent of all loan fees comes from consumers who borrow seven or more times in 12 months. Twenty percent of payday loan transaction series end in default and 33 percent of single-payment auto title loan sequences end in default.
Miller is joined in filing these comments by the attorneys general of California, Colorado, Connecticut, the District of Columbia, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, New York, Nevada, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and Wisconsin.