Crucial Georgia Usury Cap Should Be Expanded to Protect Consumers from the Debt Trap
ATLANTA, GA – Yesterday, the Consumer Financial Protection Bureau (CFPB) eliminated consumer protections against predatory payday and car title lenders, leaving Georgia families exposed to the harms of car title lending. While Georgia’s usury cap provides protections from the payday loan debt trap, abusive car title lending still plagues Georgia. Currently, the state does not treat this type of predatory lending as a small-dollar loan, but rather allows car titles to be “pawned” with interest rates as high as 300 percent.
“This is the worst possible time to expose Georgia consumers to predatory lenders. The economic crisis stemming from the COVID-19 pandemic leaves many families struggling to get by,” said Liz Coyle, executive director of Georgia Watch. “To protect Georgians during this financially unstable time, the legislature should implement a 36% cap on all small-dollar loans, including car title and installment loans. We also urge Congress to enact H.R. 5050, a bill to establish a strong interest rate cap to stop predatory practices across the country.”
According to the Center for Responsible Lending, car title lending costs Georgia families $199,575,563 per year in abusive fees. Borrowers must provide the title of their vehicle as collateral for this high-cost loan, which forces a family dependent on that vehicle for their livelihood to renew the loan repeatedly if they cannot afford to pay it off in full — or lose their car to the lender.
In 2017, the CFPB finalized a rule set to go into effect in 2019 that was designed to protect consumers by requiring lenders to make affordable loans – loans that borrowers could pay back without taking out another loan in order to cover living expenses. The ability-to-repay standard was expected to end the abusive payday and car title lending business model, which depends on trapping borrowers in long-term, unaffordable debt. This critical ability-to-repay provision was delayed in 2019 and completely eliminated in yesterday’s action by CFPB Director Kathy Kraninger, appointed by the Trump administration in 2018.
Founded in 2002, Georgia Watch is a statewide, non-profit consumer advocacy organization working to inform and protect Georgia consumers on matters that significantly impact their quality of life, including the effects of predatory business practices, the high cost of utilities and healthcare, and restricted access to the civil justice system.