United States: Maintain Strict Payday Loan Controls
(Washington, DC) – The Consumer Financial Protection Bureau should not repeal any part of the national rule governing salary, vehicle title, and certain high-cost installment loans, Human Rights Watch said yesterday in a report. letter to Kathy Kraninger, director of the agency. In February 2019, the agency proposed to go back parts of the rule governing short-term, high-interest loans finalized in 2017, in particular the requirements on lenders to ensure borrowers have the capacity to repay loans before they are issued.
Payday loans and other types of short-term, small dollar loans often come with exorbitant interest rates. This can make repayment difficult for borrowers, many of whom live paycheck to paycheck. Borrowers who cannot afford to pay off a loan in full may fall into a “debt trap”, needing to take out another loan with additional fees, creating a cycle of compound costs and increasing repayment periods. . People can lose their cars or other property or sacrifice their basic needs when this happens.
“Reasonable regulations that prevent predatory lending practices are essential to prevent people from getting into overwhelming and unavoidable debt,” said Arvind Ganesan, director of affairs and human rights at Human Rights Watch. “The Consumer Financial Protection Bureau developed these regulations after rigorous national research and extensive consultation and should implement them without delay to help protect the country’s most vulnerable. “
In the letter, Human Rights Watch presented research on the negative impact of predatory payday loans on Native Americans living on reservations in South Dakota and New Mexico. In a survey of nearly 400 people, Human Rights Watch found that payday loans are difficult to repay for the majority of borrowers who responded and are problematic in meeting household expenses. About a third of the borrowers who responded reported serious consequences as a result of their payday loan, including threats of criminal prosecution by debt collectors, eviction and job loss.