Today, 104 House Democrats, led by Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, sent a letter to the Consumer Financial Protection Bureau (CFPB) urging it to adopt a strong final payday lending rule and close loopholes that harm consumers.

Congress gave the CFPB the authority to study and regulate the payday lending industry to curb its predatory practices, which trap consumers in an endless cycle of debt. On June 2, the CFPB released a proposed rule to rein in predatory payday lending. In the letter to CFPB Director Richard Cordray, the Members applauded the Bureau’s efforts “to ensure that fairness, honesty, and transparency become basic components of the products offered by the small-dollar lending industry.”

“It is with these principles in mind that we encourage the CFPB to adopt a final rule that truly ensures access to responsible small-dollar credit,” the letter states. “The CFPB’s final rule must close every loophole that is shown to harm consumers.”

The Members called on the Bureau to ensure that payday lenders consider a borrower’s ability to repay a loan and to close loopholes that would allow borrowers to take out multiple loans in succession and to shorten the “cooling-off” period between loans. A recent staff report by the Democratic staff of the Financial Services Committee found that payday lenders frequently take advantage of loopholes at the state level in order to skirt state regulation, even in states where payday lending is banned.

“Only a comprehensive federal framework, free of harmful loopholes, can supplement existing state protections and help stop consumers from becoming trapped.”

The full text of the letter can be found below:

The Honorable Richard Cordray
Director
Consumer Financial Protection Bureau
1700 G Street, NW
Washington, DC 20552

Docket No: CFPB-2016-0025

Dear Director Cordray:

We write to applaud the Consumer Financial Protection Bureau (CFPB) for taking a critical step in protecting America’s consumers by proposing the first set of federal regulations specifically focused on small-dollar lending. For years, some small-dollar lenders—offering products such as payday loans, deposit advances, vehicle title loans, and high-cost installment loans—have extracted billions of dollars in abusive fees and high interest rates from the very consumers and communities who can afford it the least. The result has left millions of consumers trapped in an endless cycle of debt.

We support the Bureau’s efforts to ensure that fairness, honesty, and transparency become basic components of the products offered by the small-dollar lending industry. Moreover, we firmly reject the idea that the need for access to small-dollar credit somehow requires regulators to turn a blind eye to any predatory practice or product feature that hurts borrowers.

It is with these principles in mind that we encourage the CFPB to adopt a final rule that truly ensures access to responsible small-dollar credit. The CFPB’s final rule must close every loophole that is shown to harm consumers.

The Bureau’s adoption of an ability-to-repay principle based on a borrower’s income and expenses is critical to ensuring fairness for consumers. Lenders must have an incentive to make small-dollar loans that borrowers can afford to repay, while still being able to pay for their basic living expenses—like housing, childcare, food, and medical costs.

We also encourage the Bureau to enact stronger protections against consumer abuses in the small-dollar industry by closing loopholes that would allow borrowers to take out multiple loans in succession or provisions that would reduce the cooling-off period. Earlier research by the Bureau shows that 62 percent of payday loans are made to consumers that end up taking out seven or more loans in a row. Likewise, more than two-thirds of title loan business comes from consumers who reborrow six or more times. This cycle of debt can lead to a cascade of financial consequences, like bank penalty fees, lost bank accounts, delinquency on other bills, and even bankruptcy.

14 states and the District of Columbia have already responded to these concerns by banning high-cost payday lending for their residents. The final CFPB rule should strengthen and support these strong consumer protections by affirming the importance of strong state laws that protect consumers from the harm caused by triple-digit interest rates.

More needs to be done to prevent consumers from falling into a debt trap. Though we applaud the CFPB for taking the necessary first steps to address predatory practices in the small-dollar credit market, we urge you to adopt a final rule with additional protections that will ensure responsible lending. Only a comprehensive federal framework, free of harmful loopholes, can supplement existing state protections and help stop consumers from becoming trapped.

Sincerely,

Maxine Waters
Bill Pascrell, Jr.
Donald Payne, Jr.
Earl Blumenauer
Suzanne Bonamici
Danny K. Davis
Nydia M. Velázquez
Eleanor Holmes Norton
Alan Lowenthal
Keith Ellison
Bonnie Watson Coleman
Raúl M. Grijalva
Jan Schakowsky
James P. McGovern
José E. Serrano
Luis Gutiérrez
Frederica Wilson
John A. Yarmuth
Katherine Clark
Charles B. Rangel
Pete Aguilar
John Garamendi
Mark Takano
Rubén Hinojosa
Terri A. Sewell
John Conyers, Jr.
Lucille Roybal-Allard
Julia Brownley
James R. Langevin
Jackie Speier
Chris Van Hollen
Tim Ryan
Jim McDermott
David N. Cicilline
Louise M. Slaughter
John Lewis
Zoe Lofgren
Jerrold Nadler
Stephen F. Lynch
Michael E. Capuano
Danald S. Beyer, Jr.
David Price
Mark Pocan
Chellie Pingree
Frank Pallone, Jr.
Henry C. “Hank” Jr. Johnson
Elijah E. Cummings
Michael M. Honda
Al Green
Rosa L. DeLauro
Gerald E. “Gerry” Connolly
Peter J. Visclosky
Robert C. Scott
André Carson
Linda Sánchez
Yvette D. Clarke
Barbara Lee
Carolyn Maloney
John B. Larson
Alma Adams
Joe Courtney
Anna G. Eshoo
Cedric Richmond
Steve Cohen
John P. Sarbanes
Ami Bera
Suzan DelBene
William “Lacy” Clay, Jr.
Jared Polis
Lloyd Doggett
Sheila Jackson-Lee
Sander Levin
G.K. Butterfield
Marcia L. Fudge
Jared Huffman
Sean Patrick Maloney
Nita M. Lowey
Filemon Vela
Peter Welch
Hakeem Jeffries
Sam Farr
Tammy Duckworth
Peter DeFazio
Robert Brady
Ted Lieu
Karen Bass
Mark DeSaulnier
Adam Smith
Xavier Becerra
Judy Chu
Stacey Plaskett
Donna F. Edwards
Joseph Kennedy, III
Eddie Bernice Johnson
Marc Veasey
Ann Kirkpatrick
Brian Higgins
Tulsi Gabbard
Betty McCollum
Janice Hahn
Joyce Beatty
Robin Kelly
Brenda Lawrence
Denny Heck

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