Attorney General Opposes CFPB Effort to Delay Protections From Payday Lenders
03/19/2019 Release from the Office of Attorney General Mark Herring:
RICHMOND (March 19, 2019) – As part of his ongoing efforts to protect Virginians from predatory lending, Attorney General Mark R. Herring today urged the 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. In 2017, approximately 96,000 Virginians took out more than 309,000 payday loans totaling nearly $123 million with an average APR of 254%. More than 122,000 Virginians took out approximately $155 million in car title loans in 2017, and nearly 12,000 Virginians had their cars repossessed and sold for inability to repay a car title loan. Attorney General Herring is part of a coalition of 25 states who sent a letter to the CFPB.
“Under the Trump Administration, the CFPB has continuously pulled back or changed policies and regulations that protect borrowers from predatory lenders and delaying this new rule is just one more example,” said Attorney General Herring. “Unfortunately, many Virginians who have fallen on hard financial times turn to predatory lenders, unaware of the financial quicksand these small-dollar loans can be. I have pushed for stronger laws against predatory lenders in Virginia, but until we have those I will continue to do all I can to protect Virginians from their predatory practices.”
In 2017, the 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 August 19, 2019, to give lenders time to develop systems and policies. The 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, the 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 the 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.
Attorney General Herring is joined in filing these comments by the Attorneys General of California, Colorado, Connecticut, the District of Columbia, Delaware, Hawaii, Iowa, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, New York, Nevada, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and Wisconsin.