Public can comment on regulations intended to stop usurious practices that prey on those in great financial stress
Proposed rules regulating payday and auto title loans, released June 2 by the Consumer Financial Protection Bureau, are a positive step to protect Texans from unscrupulous lenders who take advantage of people in great financial stress, according to Jennifer Allmon, executive director of the Texas Catholic Conference (TCC).
The TCC has been on the forefront of asking for regulation of the payday and auto title loan industry since 2009. Currently, payday lenders in Texas charge interest rates and fees that can be as high as 1,950 percent annually, according to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray. Many of the loans are taken by people with unexpected medical expenses or other essential needs.
“When we realized that this is about the most vulnerable people being taken advantage by immoral lenders, our bishops engaged and said we can’t witness this happening and not speak out,” explained Allmon, who has been working with civic and faith leaders, everyday Texans and other coalitions to regulate the industry.
One of the successes due to the bishops’ and others’ work has been 35 Texas cities passing local ordinances that limit the fees lenders can charge. A 2015 study published by the League of Women Voters found that payday and auto title lending caused an estimated annual net loss of approximately $351 million in economic value and 7,375 jobs in Texas.
The CFCB regulations intend to end payday debt traps by requiring lenders to take steps to make sure consumers have the ability to repay their loans. The proposed rule would also cut off repeated debit attempts that rack up fees. These strong proposed protections would cover payday loans, auto title loans, deposit advance products, and certain high-cost installment and open-end loans. Advocates have expressed some concern that there are potential loopholes in the rules that could be exploited by lenders to extend high cost loans and escape protections intended to assess the borrower’s ability to repay.
“Unregulated payday and auto title loans are destroying not only individuals, but also crippling our Texas communities,” Allmon said. “We can help families get out of the vicious cycle of debt by establishing reasonable standards for an industry that has taken advantage of the poor and vulnerable for too long. As we take more time to review these new rules, we urge the CFPB to strengthn any potential loopholes to ensure maximum protection from consumer harm.”
The public can file comments until Sept. 14 on the CFPB regulations.
The TCC is the association of the Catholic bishops of Texas. Through the TCC, the bishops provide a moral and social public policy voice that includes monitoring all legislation pertaining to Catholic moral and social teaching; accredit the state’s Catholic schools; and maintain records that reflect the work and the history of the Catholic Church in Texas.
Source: Texas Catholic Conference