Payday, car-title lenders ‘prey’ on Floridians for $311M, groups say

moneyfistGroups backing federal rules proposed Thursday to crack down on payday and car-title loans say they cost Floridians more than $300 million a year, trapping people with interest rates that often top 300 percent.

“Current rules allow lenders to profit by pushing low-wage workers deeper into poverty,”  said the Rev. Dr. Russell L. Meyer, executive director of The Florida Council of Churches. “That means children go hungry, the sick can’t afford medicine, and families end up homeless. Temporary credit should give our neighbors a hand up, not make their lives harder.”

An association representing lenders warns the proposed rules from the U.S. Consumer Financial Protection Bureau are misguided and go too far, risking a cutoff in credit to many who need it.

“The CFPB’s proposed rule presents a staggering blow to consumers as it will cut off access to credit for millions of Americans who use small-dollar loans to manage a budget shortfall or unexpected expense,” said Dennis Shaul, chief executive officer of the Community Financial Services Association of America in Alexandria, Va. “It also sets a dangerous precedent for federal agencies crafting regulations impacting consumers.”

A summary of the proposed rules is here.

Federal officials said tougher rules are needed.

“The Consumer Bureau is proposing strong protections aimed at ending payday debt traps,” said CFPB Director Richard Cordray. “Too many borrowers seeking a short-term cash fix are saddled with loans they cannot afford and sink into long-term debt. It’s much like getting into a taxi just to ride across town and finding yourself stuck in a ruinously expensive cross-country journey. By putting in place mainstream, common-sense lending standards, our proposal would prevent lenders from succeeding by setting up borrowers to fail.”

The proposals would require new disclosures and options for consumers, and aim to make it harder for lenders to offer products that often result in continuous borrowing at high rates to pay off past loans, or the loss of title to a car.

Comments on the proposals are due Sept. 14 and “will be weighed carefully before final regulations are issued,” federal officials said.

Some advocacy groups say the proposals still contain loopholes and need further work to completely close what they call debt traps.

“It is a good beginning, but there is still much work to be done to ensure this rule truly protects consumers from the legalized loan sharks who prey on our communities in many states,” said Mike Litt, U.S. Public Interest Research Group’s national consumer program advocate.

The changes have the potential to save Florida residents millions of dollars if changes are made before the rule is finalized, said Alice Vickers, Director of the Florida Alliance for Consumer Protection.

 

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