More than one-fourth of U.S. senators recently put their signatures on a letter to CFPB Director Richard Cordray asking for the CFPB to strengthen consumer protections in the proposed payday lending rule before issuing the rule in final form. Although the 28 senators, all Democrats, approve of the bureau’s efforts, they say changes are needed to its proposed payday loan rule.
“We encourage the CFPB to strengthen certain protections in the proposed rule to ensure the strongest possible defense against the predatory lending models that trap consumers in unaffordable and escalating cycles of debt,” the letter states.
Among the rule’s mandates, the CFPB’s proposed rule would require short-term lenders to evaluate borrowers’ ability to repay loans. The senators take issue with an exemption in the rule that would, for example, enable a lender to make six loans to a borrower without evaluating their ability to repay—as long as certain disclosures are made and borrowing history conditions are met. The senators are urging the CFPB to reconsider the exemption and strengthen loan requirements to ensure borrowers have the ability to repay their loans.
Legislators also disagree with a change the CFPB made in its preliminary proposal regarding the cooling-off period between loans. The CFPB’s original proposal called for a 60-day waiting period between loans, but the agency’s proposed rule lowered it to 30 days.
“By reducing the cooling off period, the CFPB’s protection against repeated borrowing is substantially weakened,” the letter noted. “We urge the CFPB to ensure that a cooling off period is long enough that borrowers can manage their expenses and are not re-borrowing to service prior short-term loans.”
The CFPB has extended its deadline to submit comments on the proposed rule to Oct. 7. Also, the deadline for the CFPB’s request for information (RFI) regarding other loan products and practices not covered in the proposed rule has been extended to Nov. 7.
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