CFPB rule proposal for small-dollar loans seeks to fix the fundamental problem with payday and auto title loan markets.
The Consumer Financial Protection Bureau—the federal agency charged with regulating payday, auto title, and similar loans—has proposed rules that shift the market toward longer-term installment lending. Unfortunately, as drafted, these regulations would allow payday loans with 400 percent interest rates to flourish while locking out lower-cost loans from banks and credit unions, leaving millions of borrowers exposed to harmful loans.
Further, because small-dollar lenders are licensed at the state level, the CFPB’s authority over them is limited, which means state policymakers will need to ensure that their laws set strong interest rate limits and other consumer protections.
Pew has published a collection of resources, including an analysis of the proposal and policy recommendations, to encourage the bureau and other federal regulators to strengthen this important framework.