Minnesota Attorney General Keith Ellison has urged the Consumer Financial Protection Bureau (CFPB) to take immediate action to protect consumers from abuses in payday lending, vehicle-title lending, and other types of high-cost exploitative consumer lending.
Ellison joined 24 other states in a letter that urges the CFPB not to delay even further a rule to that effect, first finalized in 2017, that is scheduled to be implemented later this year.
“Too many people face a special struggle in affording their lives and living with dignity: the struggle to keep up with abusive lending practices that drive folks further into debt,” Ellison said. “Two years ago, the CFPB finalized a rule to protect people from exploitation in payday lending and other practices that would give my office more tools to help people afford their lives. Now, though, they want to put off implementing the rule for another year. I joined this letter because it’s my job to protect Minnesotans, and Minnesotans who are struggling can’t wait any longer for this rule to protect them.”
In 2017, CFPB announced a new rule that would help protect borrowers and ensure that they would 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 August 19, 2019, to give lenders time to develop systems and policies. CFPB has now proposed to further delay compliance to November 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.
Ellison said together, these actions would put at risk hard-fought protections for borrowers. 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.
Ellison is joined in this letter by a 25-state coalition, led by North Carolina Attorney General Josh Stein, that includes the attorneys general of California, Colorado, Connecticut, the District of Columbia, Delaware, Hawaii, Iowa, Illinois, Maine, Maryland, Massachusetts, Michigan, New Jersey, New Mexico, New York, Nevada, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and Wisconsin.