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Comment to the CFPB on Request for Information on Payday Loans, Vehicle Title Loans, Installment Loans and Open-end Lines of Credit

November 7, 2016
Payday Loans
Comment Letter

Lenders can and do make non-covered loans without regard to the borrower’s ability to repay as scheduled, and doing so can be highly profitable. In particular, high-cost loans provide a significant disincentive against lending based on ability to repay, even absent a coercive repayment mechanism or security. When rates are high, lenders can profit despite significant defaults and can even make profits on loans that default.

We urge the Bureau to use its enforcement authority without delay to address unfair and abusive practices related to lending without regard to ability to repay in the high-cost lending market generally, including the typical practice of serial refinancing in the consumer finance market.

We are also concerned about other products and practices that already in the market and are not covered under the Concurrent Proposal as currently constructed, and which have significant consumer protection concerns. These concerns include:

  • High rate loans without vehicle titles or payment devices and installment loans made without ability to repay consideration, including:
    • Loans secured by personal property;
    • Loans made through “live check” marketing;
    • Lenders that rely on aggressive debt collection or other tactics rather than access the borrower’s bank account.
  • Purchase money loans on sales of overpriced items and without consideration of ability to repay.
  • Loans made through other exemptions from the Concurrent Proposal, including prepaid card lines of credit and other credit cards, and other exemptions.
  • Marketplace loans, even though the rates are generally under 36%.