Pew Urges CFPB to Forgo Proposed Disclosure Test, Reinstate 2017 Payday Loan Rule
Comments outline why disclosures are inadequate to protect consumers
On Dec. 14, 2020, The Pew Charitable Trusts filed a letter calling on the U.S. Consumer Financial Protection Bureau to withdraw its proposal to test payday loan disclosures and restore the safeguards it adopted in 2017 but later rescinded. The bureau has described the test as a first step toward requiring disclosures for payday loans, but Pew pointed out that ample evidence already shows that relying primarily on disclosures to regulate payday and auto title loans is ineffective.
Pew’s letter explains that the core problems with single-payment payday and vehicle title loans are not that information is presented poorly to borrowers, but rather that their payments are unaffordable, their terms are too short, their prices are unnecessarily high, and they enable lenders to collect even when borrowers lack the ability to repay. Borrowers simply cannot afford to both sacrifice a large share of their paycheck to pay for unaffordable loans and cover their regular expenses without quickly borrowing again.
Pew encouraged the CFPB to withdraw the disclosure testing proposal and reinstate its 2017 payday loan rule to ensure that loans become safer and more transparent and feature affordable payments and sufficient time to repay while preserving borrowers’ access to credit.