U.S. PIRG’s comment letter to the CFPB regarding its proposed rule about payday, car title, and high-cost installment loans

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Below is U.S. PIRG’s comment letter submitted to the CFPB regarding its proposed rule about payday, car title, and high-cost installment loans. Today is the last day the CFPB is accepting public comments before the rule is finalized. We encourage comments in support of a strong rule here.

RE: PROPOSED PAYDAY LOAN RULE/Docket No: CFPB-2016- 0025 or RIN 3170-AA40

Dear Director Cordray,

Thank you for the opportunity to comment on this important rule concerning payday, car title, and high-cost installment loans. U.S. PIRG is a federation of independent, state-based, citizen-funded organizations that advocate for the public interest. 

As a leading national consumer and good government advocacy organization that has analyzed payday complaints in the CFPB’s Consumer Complaint Database and engaged over 11,000 people across the country against the payday debt trap, we and the state PIRGs are pleased to see a proposed rule that establishes an ability-to-repay standard. An ability-to repay standard would require payday lenders for the first time to make sure their customers can afford to pay back these loans with enough money left over for basic living expenses without having to take out more loans. This is extremely significant; while a longstanding tenet of responsible lending, it is one ignored by these abusive industries driven by unaffordable loans.

However, in order to truly shut the door on the debt trap, we urge the following improvements to the rule, as noted in a comment letter we cosigned with 723 other civil rights, consumer, labor, faith, veterans, seniors, business, and community organizations from all 50 states:

  • An ability-to-repay test, based on income and expenses, with no exceptions: Apply it to every single loan where the lender takes control over the borrower’s checking account, car, other property, or wages.
  • Stronger protections against flipping loans: Ensure borrowers can’t be stuck in so-called two-week loans for three months or more, and prevent serial flipping of longer-term loans.
  • Enhance strong state laws: The rule must not undermine states that prohibit these high-cost abusive loans, and it should deem a violation of state law an unfair practice.
  • Close the loopholes: Ensure lenders can’t game the rule in a way that leaves borrowers without enough money to live on.

We are also filing our recent report, Predatory Loans & Predatory Loan Complaints, as an official comment. This report analyzes complaints about payday loans to the Consumer Financial Protection Bureau (CFPB) and shows a critical need for strengthening the agency’s proposed rule to rein in payday loans and other high-cost lending. In particular, our analysis of written complaints to the CFPB found significant evidence of the major problem with payday loans: borrowers can’t afford these loans and end up trapped in a cycle of debt. Ninety-one percent (91%) of written complaints were related to unaffordability

Here is an excerpt from the executive summary of the report, which is available here: http://bit.ly/pirg_paydayreport

  • Consumers have submitted nearly 10,000 complaints in the payday loan categories of the database in less than three years.
  • More than half the complaints were submitted about just 15 companies. The other half of the complaints were spread across 626 companies.
  • Complaints against these 15 companies cover problems with a full spectrum of predatory products and services. These 15 companies include:
    • Storefront and online lenders;
    • Short-term payday, long-term payday installment, and auto title lenders;
    • Debt collectors;
    • Lenders claiming to operate as tribal lending entities; and
    • Members of industry associations, whose members are said to abide by best practices they claim ensure responsible lending.
  • Enova International (doing business as CashNetUSA and NetCredit) has the most total complaints in the payday categories with 737, making up about 8% of all payday complaints, followed by Delbert Services, CNG Financial Corporation (doing business as Check ‘n Go), CashCall, and ACE Cash Express.
  • The two largest types of problems under the payday loan categories were with communication tactics and fees or interest that was not expected. These two issues made up about 18% of all complaints each.
  • Beginning in March 2015, the CFPB added an option for consumers to share the written explanations of their problems in the database. Since then, 3,695 complaints in the payday categories have been published. A total of 1,663 or 45% of these complaints include publicly available explanations, also known as narratives, in the database.
    • Although consumers may select only one type of problem when filing a complaint, a review of the narratives reveals many complaints involve multiple problems.
    • 91% of all narratives showed signs of unaffordability, including abusive debt collection practices, bank account closures, long-term cycles of debt, and bank penalties like overdraft fees because of collection attempts.

An ability-to-repay standard is a significant step, but a strong rule must be free of loopholes that will allow predatory practices to continue. Unaffordable high-cost loans dig borrowers into a deeper hole of debt. It’s time to put a strong rule in place that will slam shut the debt trap.


Mike Litt
Consumer Advocate, U.S. PIRG