The Consumer Financial Protection Bureau (CFPB) proposed new regulations Thursday to crack down on the payday lending industry.
Payday lending provides short-term access to credit, but usually comes with high interest rates, often in the triple digits, and expensive fees.
"The consumer bureau is proposing strong protections aimed at ending payday debt traps," CFPB Director Richard Cordray said in a news release. "Too many borrowers seeking a short-term cash fix are saddled with loans they cannot afford and sink into long-term debt. It's much like getting into a taxi just to ride across town and finding yourself stuck in a ruinously expensive cross-country journey. By putting in place mainstream, common-sense lending standards, our proposal would prevent lenders from succeeding by setting up borrowers to fail."
Automatically transferring a small amount of money
into a basic savings account every month is the easiest and most
effective way for low- to moderate-income individuals to save money,
according to a recent report by the Consumer Federation of America (CFA).
Consumer advocates are calling for a ban on all types of payday lending, saying that without regulatory federal laws, millions of borrowers charged triple-digit annual percentage rates (APR) will continue to be trapped in never-ending cycles of debt.
Advocates will sing financial reform carols outside a payday loan store in Chicago's Loop this morning, offering a simple message to city residents and commuters: beware of the Payday Loan Grinch, who is still able to offer loans that carry interest rates of up to 700