Pew Commends New Payday Loan Rule That Provides Consumer Protection for Short-Term Loans
Says Consumer Financial Protection Bureau offers opportunity for states and other regulators to make small installment loans safe
WASHINGTON—Nick Bourke, director of The Pew Charitable Trusts’ consumer finance project, issued this statement on the Consumer Financial Protection Bureau’s final payday loan rule:
“The CFPB took a strong step today to protect consumers from harmful, single-payment payday and auto title loans. The final rule is a major improvement over the 2016 proposal because it opens the door to lower-cost installment loans from banks and credit unions. But federal regulators and states still have important work to do.
“Bank and credit union regulators must now create the clear guidelines these lenders need in order to make small installment loans safely and profitably. If they do, millions of consumers can save billions of dollars by gaining access to lower-cost credit. Banks and credit unions have shown a willingness to serve these customers with small installment loans, and they can do it at prices that are six times lower than payday loans. With strong safeguards in place, regulators should let them.
“States should act quickly, too, because the CFPB’s rule left the regulation of high-cost installment loans to them. State legislatures can prevent the spread of today’s annual rates of 400 percent on payday installment loans by requiring affordable payments, lower prices, and reasonable time to repay.
“The CFPB’s rule is well-balanced, curbing consumer harm while allowing for continued access to credit. These protections will improve the lives of millions of American consumers.”
The Pew Charitable Trusts is driven by the power of knowledge to solve today’s most challenging problems. Learn more at pewtrusts.org.