Pew: Consumer Financial Protection Bureau Abandons Payday Loan Safeguards

WASHINGTON— The Pew Charitable Trusts expressed disappointment with today’s decision by the Consumer Financial Protection Bureau (CFPB) to rescind its 2017 payday loan rule, saying the move could leave millions of Americans at high risk of becoming trapped in a cycle of debt.

The 2017 rule was based on years of extensive research and was carefully designed to limit harmful lending practices while keeping credit available to consumers. It put in place safeguards for single-payment loans and encouraged lenders to offer affordable small installment loans that—according to Pew’s research—could have saved millions of borrowers billions of dollars annually.

The new rule the CFPB adopted today eliminates the 2017 rule’s central consumer protection measure, its ability-to-repay provision, which curbed unaffordable loan terms by requiring lenders to determine a borrower’s capacity for repaying loans all at once.

Alex Horowitz, senior research officer with Pew’s consumer finance project, said of the CFPB announcement:

“By eliminating the ability-to-repay protections, the CFPB is making a grave error that leaves the 12 million Americans who use payday loans every year exposed to unaffordable payments at annual interest rates that average nearly 400 percent.

“The bureau’s decision to rescind its 2017 rule ignores the foundational rationale for the rule and fails to refute or reinterpret the bulk of research underpinning it. The case the bureau offers for overturning the rule and allowing loans that have a long track record of failing consumers is unsubstantiated.

“The 2017 rule curbed small loans with balloon payments and encouraged mainstream lenders to offer affordable installment loans.

“The 2017 rule was working. Lenders were beginning to make changes even before it formally took effect, safer credit was already starting to flow, and harmful practices were beginning to fade. Today’s action puts all of that at risk.

“Despite the CFPB’s abandonment of these critical consumer safeguards, banks, credit unions, and responsible lenders should reject balloon payments and instead offer consumers installment loans on affordable terms.”

More information on the regulatory landscape for small-dollar loans is available at

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