ATLANTA, GA, October 5, 2017 – Today the Consumer Financial Protection Bureau (CFPB) finalized a rule designed to protect consumers from payday and title pawn lending. The rule stems from over five years of research, as the CFPB recognized the devastating harm that high-interest predatory lending causes millions of Americans.
In Georgia, payday lending is effectively banned, but title pawn lenders can charge shockingly high interest rates on relatively small loans — typically over 300% — which ensnare consumers into a long-term cycle of debt. Car title lenders are the only lenders in Georgia allowed to charge more than the state’s 60 percent usury cap on loans. According to the CFPB research, the majority of auto title loans are re-borrowed on their due date or shortly thereafter and 1 in 5 title loans results in borrowers losing their vehicle.
The new CFPB rule helps protect consumers by requiring lenders to establish a borrower’s ability to repay the loan before making it. Once the rule is enforced, lenders will be required to conduct a “full-payment test” to determine whether the borrower can afford the loan payments and still meet basic living expenses and major financial obligations.
“We are pleased to see a final rule from the CFPB that includes ability-to-repay provisions,” said Liz Coyle, Executive Director of Georgia Watch. “These are provisions we specifically requested the CFPB include in the final rule.”
“The State of Georgia still has important work to do to reign in the title pawn lending industry, but this federal rule creates an important base of protections that did not exist before,” Coyle added. “The CFPB clearly recognizes our States’ authority to keep payday lending out, and its new rule affirms that strong interest rate caps are the best defense against predatory lending.”
Founded in 2002, Georgia Watch is a statewide nonprofit organization working to protect and empower Georgia consumers on matters that impact their quality of life, particularly focused on those most affected by predatory business practices, the high cost of utilities and healthcare, and restricted access to the civil justice system.