CSAJ Opposes Predatory Lending Proposed Rule

On May 15, 2019, CSAJ filed federal comments opposing the Consumer Financial Protection Bureau’s (CFPB) proposal to undo protections related to predatory lending that it adopted in 2017. The core principle of CFPB’s 2017 rule required lenders to ensure that a loan is affordable via an ability-to-repay standard so that a survivor would not have to re-borrow high interest loans or default on other expenses.

99% of survivors of domestic violence report economic abuse by their partner, with 38% of abusive partners stealing money and assets, 71% building debt, and 78% sabotaging survivors’ employment. Low-income women are two times more likely to experience domestic violence. Society continues to wonder why survivors don’t leave their abusers. The moment when survivors are least safe and most economically unstable makes it untenable for many survivors to leave or to make that choice as rapidly as they would like to. As financially vulnerable individuals, they are primary targets of the predatory lending industry.

Safety is expensive. Survivors wrestle with the costs of transportation, childcare, relocation, legal fees, employment disruption, safety costs (changing locks, getting new documents, etc.), and managing the debt created by their abusive partner. While the payday lenders appear friendly and helpful, once survivors fall prey the payday lending debt trap, payday lenders can take control over bank accounts, garnish wages, take away cars, and use harassment and threats to maintain control over the survivor. Indeed, this payday debt trap mirrors the coercive control and economic abuse perpetrated by the abusive partner the survivor worked so hard to escape. Punishing survivors’ attempts to bridge their economic insecurity by taking away other assets or continuing harassment in new ways is deplorable. We cannot effectively address domestic violence if we legitimize abusive payday lending systems.

The need for alternatives (safer lending options with traditional lending institutions, low-cost personal loans, and/or community development credit unions) is key when considering that it is the very lack of regulation of the payday lending industry that keeps predatory lenders in business. The lack of regulation means that the existing business model stays in place: borrowers will need to keep taking out additional payday loans to pay off the previous payday loans. Payday lenders have a vested interest in remaining predatory: more loans, higher interest, greater fees, better profit. Regulations will not limit consumers’ access to credit. Regulations will limit consumers’ access to unsafe and predatory credit. Lenders that cannot comply with the most basic consumer protections should not be allowed to profit off vulnerable consumers.

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