Many of you have followed our work to reform the payday and auto-title lending industry, some have called their legislators and spoken at city council meetings in support of local payday ordinances, and there is still important work to do. Today, we are asking our network to support a new rule by the Consumer Financial Protection Bureau aimed at cracking down on some of the most abusive practices in this industry.
The CFPB is designed to a “provide a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial marketplace.” The CFPB is structured to insulate it, and its policy decisions from the financial interests that pressure elected officials in our state legislature and in Congress to vote against reform. It has explicit responsibility and authority to enforce current law and prescribe new rules for the small-dollar lending marketplace in order to “identify and prevent unfair, deceptive, and abusive acts and practices.”
The CFPB rules are designed to stop the debt trap by ensuring that lenders are making affordable loans. An affordable loan takes into account a borrower’s ability to repay the loan and meet his or her other financial obligations without having to re-borrow to make ends meet. The proposed rule establishes an ability‐to‐repay principle, based on income and expenses, which is a tenet of responsible lending followed by banks and credit unions.
You can find the proposed rule here.
Faith voices will be critical in the fight. Read this blog post on the moral case for reform and the importance of faith voices in the fight written by White House Senior Advisor Valerie Jarrett.
The deadline to comment on the proposed rules is Oct. 7. To submit a comment, visit http://stoppaydaypredators.org/texasfairlending/.
Tips for submitting a comment:
● Share your story.
Don’t worry about being an expert. Share what you have seen or experienced in your churches or communities. Our stories help the CFPB build a strong case for reform. Make your own moral case for reform.
● Everything's bigger in Texas ...
... including the fees charged by payday lenders. Spotlight the importance of the CFPB rule for Texans, especially given the lack of activity in Austin on this issue.
● Payday lenders make most of their profits in Texas, in 2013-2014, $1.5 billion in fees were collected from financially fragile families.
● Texans pay more for these loans, on average $115 for a 14-day $500 loan compared to $55 in Florida and $65 in Oklahoma.
● The CFPB rules are necessary to protect the poor and vulnerable in Texas. For example, 76 percent of borrowers also receive government aid.
● If you would like to include MSA specific data, you can find it here on the Texas Fair Lending Alliance website.
● Encourage the CFPB to pass a strong rule.
These rules represent an improvement and the foes of a strong rule are loud and organized. We need to demonstrate our support for reform of this industry and encourage the CFPB to pass a strong rule.
While the intent of the rule is right on, there is still room for improvement in order to ensure the maximum amount of protection the CFPB can afford borrowers.
● Ask the CFPB to strengthen the ability to repay requirement. It should apply to both short-term and longer-term loans, without exception. Lenders should be required to use objective measures to determine if a loan is “affordable,” meaning the borrower can repay the loan while also covering basic living expenses, without relying on charitable services.
● Ask the CFPB to return to the 60-day cooling off period as proposed in the original outline of the rule. This is critical to improving protections against the repeated flipping of loans.
● Get others involved.
Host a screening of the new documentary, “The Ordinance,” for your members, your small group, your Sunday School class, or your friends. "The Ordinance" features several Texas Baptist pastors who share their passion and reasons for getting involved in the fight against payday lending in Texas. At only 30 minutes, "The Ordinance" is a great tool to share with others about the harms of payday and auto-title lending and to get them involved in the fight. It is available for rent or purchase at https://deidox.org/theordinance/.