TNCA Demands Action on Payday Lending
CITIZEN ACTION WELCOMES CFPB SMALL DOLLAR LENDING RULE
Releases report about payday predators in Tennessee
(Nashville, TN) – Today, the Consumer Finance Protection Bureau releases their long-awaited proposed rule on small-dollar lending and officially opens the period for public comment. Tennessee Citizen Action (TNCA), together with other members of U.S. Action across the country, are taking action and speaking up, welcoming the rule and pledging to continue working to make sure the protections are as strong as possible. TNCA also released a report detailing the impact of payday and car title lending in Tennessee.
Small dollar payday, auto title, and installment lenders regularly charge more than 300% interest and trap millions of families in debt each year. While some states have imposed interest rate caps and other regulations to protect consumers, the new proposed rule from the Consumer Financial Protection Bureau would be the first federal protections for small dollar borrowers.
A recently-released study from the Center for Responsible Lending reveals that Payday and Car Title Loan Sharks are sucking more than $400 million out of the pockets of Tennessee families each year. Tennessee ranks 7th in the nation in the amount of money extracted from its families by these predators. Tennessee’s maximum interest rate for these loan shark loans is 460%, one of the highest in the country.
“We are thrilled the CFPB has finally taken action to stop the deception and abuse that run rampant in the predatory payday lending industry,” said Andy Spears, executive director of TNCA. “As the comment period opens, members of Tennessee Citizen Action are ready to have their say and call on the CFPB to live up to its mission and protect consumers by issuing the strongest rule possible so that we can put a stop to the debt trap here in Tennessee.”
Dan Keller, a former employee of a payday lending store in Jefferson City, described his experience:
“In my few weeks of working there I saw several people come in and told me they felt “dirty” coming in. They hoped no one saw them. One was a friend that I had and when she saw me she asked me not to tell anyone she had done this. People were telling me they wanted to get out of the cycle but could not afford to not renew the entire amount. The proverbial straw that broke the camel’s back was when a couple came in that must have been in their 80s. They both got a payday loan on their social security checks. I almost cried handing them the application.”
Tennessee Citizen Action is joining National People’s Action in calling for a strong and broad small dollar lending rule that fulfills three basic criteria to protect American families. First, the rule should require income and expense underwriting practices on all loans to ensure American consumers can affordably payback the loan. Second, the rule should put a stop to the constant loan rollovers and refinances that are endemic in the industry and are hallmarks of the debt trap. Finally, the rule should prevent lenders from being able to take money directly from a consumer’s bank account or hold unlimited title to their car.
“We’re clear on what we the CFPB needs to do to fulfil their mission of protecting consumers. They need to write a rule that shuts down the debt trap,” said Liz Ryan Murray, Policy Director for National People’s Action. “Time after time, we’ve seen this industry worm their way through loopholes much smaller than these. That’s why we need a rule that’s stronger than this proposal. Millions of people across the country are depending on the CFPB to get this right and we’re going to make sure the Bureau hears from them.”
Tennessee Citizen Action works in the public interest as Tennessee’s premier consumer rights organization. Our mission is to work to improve the overall health, well-being, and quality of life for all people who live and work in Tennessee.
National People’s Action is a network of 29 grassroots organizations in 18 states working together to advance a racial and economic justice agenda for a new economy and true democracy.