Carson City – A day after President Donald Trump’s State of the Union address – where he called for expanding the middle class – his administration’s consumer agency said it wants to change key protections that keep people from sliding deeper into poverty.
Hear an audio report from Suzanne Potter …
The Bureau of Consumer Financial Protection has proposed revisions to the payday lending rule – so that lenders no longer have to verify the borrower’s ability to repay a loan without renewing it.
Suzanne Martindale, senior policy counsel for Consumer Reports, says this is a betrayal of the bureau’s core mission.
“This really does send a message that this agency that was tasked with protecting consumers would rather instead leave everything open and allow lenders to do whatever they see fit,” she states.
Thirty-seven states have banned the triple-digit interest rates common in many payday and car title loans, but in Nevada, interest rates on short term loans have no limit.
Assembly Bill 118 has eight sponsors in the 2019 legislative session and would prohibit making loans with an annual percentage rate of more than 36 percent.
On the federal level, the bureau ceased to be an independent agency once Trump gained the right to appoint the director. Since then, it put the payday rule on hold and then settled multiple exploitation cases against payday lenders with small fines.
The administration argues that the change will allow the industry to expand and offer credit to additional needy customers.
Martindale says predatory lenders profit by bleeding desperate consumers dry.
“Not all credit is created equal, and it is important to ensure that we are not enabling a marketplace that allows lenders to stick people in debt they can’t get out of and that could very likely leave them worse off than before they borrowed,” she states.
Research shows that 4 out of 5 consumers of payday loan have to re-borrow at the end of the loan’s term. And with auto title loans, 1 in 5 borrowers loses the car to repossession.