TNCA Urges Congressional Delegation to Protect Consumers

As legislation is introduced today that would overturn the Consumer Finance Protection Bureau’s (CFPB) rule protecting consumers from predatory payday lenders, Tennessee Citizen Action called on the state’s congressional delegation to stand with consumers and oppose the legislation.

“Tennessee consumers need relief from the debt trap offered by payday predators,” said executive director Andy Spears. “The resolution overturning this rule is just what the legalized loan sharks want – a feeding frenzy on the state’s most vulnerable borrowers.”

Our partners at the Consumer Federation of America offer more on why this legislative attack on consumers must be opposed:

The Consumer Federation of America (CFA) strongly opposes the Congressional Review Act Resolution that was introduced today in an attempt to quickly invalidate new consumer protections that were years in the making and the result of significant study.

The Consumer Bureau’s recently finalized payday rule’s core requirement requires lenders to determine if borrowers are able to repay short term payday and auto title loans, and longer-term loans with balloon payments before they lend the money.

“This sensible safeguard will help save consumers from getting trapped in a cycle of triple digit interest rate loans rolled over and over again,” said Michael Best, Director of Advocacy Outreach at CFA. “We oppose this Congressional effort to gut this important rule.”

 

The Debt Trap Harms Consumers

Payday loans, which often carry an annual interest rate of over 300%, are unaffordable and ultimately trap consumers in a cycle of debt where consumers roll over loans because they are unable to repay them. Lenders make money even if the loan is never successfully paid back because of high interest rates and fees—the debt trap. Financially vulnerable communities and communities of color are particularly harmed. Almost 70% of borrowers take out a second loan within a month, and one in five borrowers take out 10 loans or more consecutively. These borrowers taking out more than 10 loans a year are stuck in the debt trap and generated 75% of the payday loan fees in the CFPB’s research.

 

Congressional Review Act

The Congressional Review Act (CRA) allows Congress to, relatively quickly; disapprove a pending rule within a certain timeframe and without filibuster.  The repeal also has the impact of barring an agency from issuing another rule in substantially the same form as the disapproved rule.

 

Balanced Protections

The Final Rule was years in the making and weighs in at 1,690 pages of carefully considered text. It balances the need to protect consumers from the debt trap with addressing concerns raised by institutions like credit unions by excluding less risky products like payday-alternative loans from the rule.

“This rule is widely supported by the public. Over the last two days state advocates from across the country held at least 50 meetings with their members of Congress to affirm that their constituents need this common sense consumer protection,” said Best.

The Consumer Federation of America is an association of more than 250 non-profit consumer and cooperative groups that was founded in 1968 to advance the consumer interest through research, advocacy, and education.

For more on our consumer protection work, follow @TNCitizenAction


 

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