This week, the California Attorney General, Kamala D. Harris released a letter pleading with the Consumer Financial Protection Bureau (CFPB) to adopt tougher regulations against harmful payday and small-dollar lending practices. In the letter to the CFPB, the AG said that she strongly supports the CFPB’s proposals to help stop the abuse stemming from traditional, high-cost payday loans and collections.
The CFPB is proposing to create the first nationwide regulatory floor for the payday lending industry that can work in harmony with California’s laws and regulations to further protect vulnerable consumers from falling into vicious cycles of debt.
There were approximately 12.4 million payday loans made in 2014 in the state of California to 1.8 million consumers who had borrowed a total of $3.38 billion. California has over 2,000 licensed payday loan locations who are targeting consumers in need of emergency access to cash in counties with high poverty rates and low education levels. These payday lenders help contribute to entrapping people in an endless cycle of crippling debt.
Attorney General Harris stated; “Together with California’s existing lending laws, the Bureau’s proposals would bring needed protections to vulnerable California consumers who take out small-dollar loans, which too often are predatory and create a debt trap for fixed- and low-income borrowers. Californians who need short-term emergency access to cash are getting stuck in a destructive and unaffordable cycle of repeating high-interest loans that they cannot afford to repay.”
Here are Attorney General Kamala D. Harris’ Comments on the CFPB’s Proposed Actions:
- Require a meaningful “ability to repay” standard that would require lenders to make good-faith, reasonable determinations that a consumer has the ability to repay the loan, after satisfying financial obligations and living expenses.
- 60-day “cooling off” period between short-term loans.
- Implement an “off-ramp” to taper of indebtedness to allow an alternative to an “ability to repay” standard.
- Curbing harmful payment collection practices which will require a notification before lenders attempt to collect payment from consumers’ accounts.
- Protect consumer privacy which will require strict limitations on information entered into databases.
- Permit states to adopt more restrictive laws and regulations to take the necessary steps to clarify that it does not intend to undermine or preempt stricter state and local laws governing payday and small-dollar loans