Since 2011, Pew’s small dollar loans project has conducted extensive research on payday, auto title, and similar loans, and found that these products suffer from unaffordable payments, deceptive business practices, and excessive prices.
The Consumer Financial Protection Bureau—the federal regulator charged with setting new rules for these types of loans—has proposed a new regulatory framework and is currently working to finalize it. In the near future, states will have a choice to make: prohibit the loans entirely or substantially reform them to meet or exceed federal standards.
Pew’s goal is to provide research, recommendations, and technical assistance to help state and federal lawmakers craft policies for a safer, more affordable small-dollar loan marketplace.
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Payday loans typically carry annual percentage rates of 300 to 500 percent and are due in a lump sum, or balloon payment, on the borrower’s next payday, usually about two weeks later. These loans are advertised as quick fixes for unexpected expenses, but repaying them consumes more than a third of an average borrower’s paycheck, leading to repeated borrowing for an average of about half the year.... Read More
When Dodd-Frank created the Consumer Financial Protection Bureau (CFPB) in 2010, it gave the agency authority to regulate high-cost, small-dollar loans, including payday loans. This is important because unaffordable payments and excessive costs have caused difficulties for the millions of borrowers across the U.S. who utilize these types of loans. Read More