WFHB Bloomington Community Radio
Podcast: Play in new window | Download (Duration: 3:31 — 2.3MB)
The Consumer Financial Protection Bureau is trying to delay implementing its own rules, which would grant recipients of payday loans greater protections.
The CFPB is looking to push the compliance date of the new rules back to August, 2019.
The rules would require lenders to assess a borrower’s ability to repay their loan and still meet their financial obligations. It would also limit the number of loans a borrower can take out to six per year.
Payday loans are temporary loans given out to recipients for a short period. They are designed to be paid back after the recipient receives their next paycheck. According to Erin Macey, a policy analyst with the Indiana Institute for Working Families, that’s rarely how things work out.
The payday loan industry has drawn criticism over the past several years due to high-interest loan rates and predatory practices. According to the National Consumer Law Center, the average interest rates for the loans can range from 700% to 2000% for a 14-day loan period.
The average loan for the state of Indiana is $317, according to the Center for Responsible Lending, which researches the impact of predatory lending practices. A typical borrower will pay more than $400 in additional finance charges for a loan of that size.
The CFPB’s new rules would not have done anything to address the interest rates on payday loans, but according to Macey, it was a step in the right direction. She said the payday loan industry in Indiana will remain unaffected, until the new CFPB rules go into effect. That was scheduled to happen at the beginning of 2019, but with the delay in implementing the rules, Macey said it’s not certain when – or even if – they’ll go into effect.
The shelving of the rule came after former GOP congressman Mick Mulvaney was appointed to temporarily lead the CFPB by President Trump. Mulvaney, who also serves as the director of the federal Office of Management and Budget, has been an outspoken critic of the regulations.
The rule is expected to be on pause until the CFPB can create a new proposal for payday loan regulations.
