By Tom Crawford
Consumer advocate organizations warned Thursday that a federal rule proposed by the Consumer Financial Protection Bureau (CFPB) to put tighter limits on payday lenders could potentially harm states like Georgia that already have anti-predatory lending laws on the books.
The proposed CFPB rule would require lenders to assess whether borrowers could afford to repay the debts. It would also stop repeated attempts to hit overdue borrowers with additional bank fees and charges.
“Georgia has battled predatory lending for over a century,” said Liz Coyle, the Georgia Watch director, in a conference call with other state leaders. “We stand to have a lot to lose if the CFPB rule undermines these limits.”
Coyle said Georgia Watch would oppose “potential loopholes that we see in the current proposal. . . . we’re very concerned that the title lending industry will use the proposed rule as a Trojan horse to undermine our state laws.”
Financial industry representatives spoke against the rule for different reasons.
“The CFPB’s proposed rule presents a staggering blow to consumers as it will cut off access to credit for millions of Americans who use small-dollar loans to manage a budget shortfall or unexpected expense,” said Dennis Shaul of the Community Financial Services Association of America. “It also sets a dangerous precedent for federal agencies crafting regulations impacting consumers.”
“We know that the lenders will exploit any weaknesses in the federal payday lending law,” said Kerry Smith of Community Legal Services of Philadelphia. “States must continue to enact rate caps on these loans.”
Consumer advocates said the proposed CFPB rule would allow up to six loan renewals and urged that the exemption be deleted from final rule. They also want to deny lenders the ability to flip back and forth between short-term, and long-term loans in an attempt to “game the system” on lending laws.
“The rule should also say any violation of state interest rate caps should be considered an unfair lending practice,” said Linda Frame of the West Virginia Center on Budget & Policy.
The proposed CFPB rule is open for public comment until Sept. 14.
© 2016 by The Georgia Report
SOURCE: The Georgia Report