Troubled by consumer complaints and loopholes in state laws, federal regulators are putting together the first rules on payday loans aimed at helping cash-strapped borrowers avoid falling into a cycle of high-rate debt.
The Consumer Financial Protection Bureau says state laws governing the $46 billion payday lending industry often fall short, and that fuller disclosures of the interest and fees — often an annual percentage rate of 300 percent or more — may be needed.
Full details of the proposed rules, expected early this year, would mark the first time the agency has used the authority it was given under the 2010 Dodd-Frank law to regulate payday loans. In recent months, it has tried to step up enforcement, including a $10 million settlement with ACE Cash Express after accusing the payday lender of harassing borrowers to collect debts and take out multiple loans.
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The agency is considering options that include establishing tighter rules to ensure a consumer has the ability to repay. That could mean requiring credit checks, placing caps on the number of times a borrower can draw credit or finding ways to encourage states or lenders to lower rates.
See here and here for the background, and ACE Cash Express settlement. Given the efforts by some legislators – backed up by Greg Abbott – to destroy local control, I feel confident that no matter what the CFPB proposes, no matter how reasonable or milquetoasty, will be met by at least one bill filed to nullify it. It’s just how we roll around here.