Oppose the short-term lending rules being considered by the CFPB. These rules will limit our access to payday and other short-term loans and take away our financial freedom. Some of the rules would limit our ability to borrow money to 90 days a year and force us to wait 60 days between loans. This doesn’t work for us. If the rules become law, many of us will have no credit. The rules won’t apply to other forms of credit, so why are we being unfairly targeted? How we manage our money is our responsibility-not the federal government’s. We use these loans responsibly. Payday and other short-term loans are legal under state law and work for us. Regulation that makes it nearly impossible for us to obtain or to qualify for a small loan is the same as eliminating these loans.
Response to Petition
A response to your petition on short-term lending rules:
Thank you for taking the time to sign a We the People petition about the steps the Consumer Financial Protection Bureau (CFPB) is taking toward a potential rule to curb abusive practices in payday loans, title loans, and other short-term lending.
“The idea is pretty common sense: If you lend out money, you have to first make sure that the borrower can afford to pay it back. Don't lend somebody money if you know they can't pay it back.” — President Obama, March 26, 2015
Let’s first do a quick overview on CFPB and how it relates to the Administration.
CFPB is an independent watchdog created by the Dodd-Frank Wall Street Reform and Consumer Protection Act that the President signed into law in 2010. In its first four years, the Bureau has made dramatic progress toward addressing many weaknesses of the financial system that existed prior to the 2008 financial crisis that harmed millions of American families.
CFPB is already working to protect consumers using products across the financial system -- from credit card companies to mortgage lenders, to debt collectors and student loan servicers. And through its enforcement actions, CFPB has already provided nearly $11 billion in relief for over 25 million consumers harmed by financial institutions.
And they’re continuing to make progress in additional areas.
Now, let’s talk a bit more about ending abusive practices involving short-term lending.
The President laid out what’s at stake in abusive lending practices when he traveled to Birmingham, Alabama in March 2015:
“In theory, what they’ll say is these loans help you deal with a one-time expense. So your car breaks down, you got to get to work; you go there, cash a check real quick, or get a quick loan, and then that's the end of it. In reality, most payday loans aren’t taken out for one-time expenses. They’re taken out to pay for previous loans. You borrow money to pay for the money you already borrowed.”
“Before you know it, you find yourselves trapped in a cycle of debt. At first it seems like easy money. But the average borrower ends up spending about 200 days out of the year in debt. You take out a $500 loan at the rates that they're charging in these payday loans -- some cases 450 percent interest -- you wind up paying more than $1,000 in interest and fees on the $500 that you borrowed.”
“As Americans, we don't mind seeing folks make a profit. And if somebody lends you money, then we expect you to charge interest on that loan. But if you're making that profit by trapping hardworking Americans into a vicious cycle of debt, you got to find a new business model.”
Nobody should be in favor of a product that preys on a family’s desperation or deceives people into a loan they cannot repay.
CFPB’s goal is to design a solution that ensures borrowers still have access to affordable credit, while curbing abusive practices that are designed to trap consumers and their families in an endless cycle of debt. That’s something that the President and Administration support, along with a diverse array of American families and grassroots leaders who know firsthand the challenges posed by abusive lending practices. That includes many leaders across the faith community who have made a strong moral case for action.
In March 2015, CFPB announced it was taking an important step towards cracking down on abusive practices involving payday loans and other short-term lending, by releasing an initial outline for a rule. Under the potential rule, lenders would be required to verify that borrowers can pay them back.
It is important to remember that the CFPB operates independently of the Administration, so it is ultimately their decision alone to move forward with a proposed rule and how to design it if they do move forward.
As with other rulemakings, CFPB is conducting a thorough analysis of the issue and will engage with a variety of stakeholders to develop their views on a rule -- from borrowers to consumer groups, to a diverse array of actors in the industry.
We hope you’ll stay engaged with their rulemaking process if CFPB does decide to move forward, and lend your voice constructively to developing a rule that achieves these goals.
-- The We the People Team