On July 7, the Consumer Financial Protection Bureau eliminated protections against predatory payday lenders. In short, they’re gutting their 2017 Payday Rule. Fortunately, Montana already has the most effective protection in place, a 36% interest rate cap for payday loans. Which saves Montana families $37 million annually.
This is the worst time to gut protections against payday and car-title lending. In states without protections, payday and car-title lenders ensnare people in loans with 300% or 400% interest, leading to significant financial distress. I’m disheartened to see the CFPB gut protections in states without laws as strong as ours. Our lawmakers should stand firm in supporting our state’s existing 36% usury cap. Congress should also enact H.R. 5050, which establishes a strong rate cap to stop predatory practices across the country.
The 2017 rule would simply require lenders to make affordable loans — loans borrowers can repay without taking another loan to cover living expenses. It was built on five years of research, data collection, field hearings and public comments. This ability-to-repay standard would reduce the harms of predatory lending across the nation by disrupting the payday and car-title lending business model, which depends on trapping borrowers in long-term, unaffordable debt.
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