Letter
Letter to CFPB Director Cordray on Proposed Rule, August 16, 2016
Letter to CFPB Director Cordray on Proposed Rule, August 16, 2016
USCCB and Catholic Charities USA join other faith-based groups in letter to the Director of the CFPB, Richard Cordray with comments on the proposal.
In June of this year, the Consumer Financial Protection Bureau, proposed new rules to curb predatory payday and car title lending practices. While we represent constituencies with a wide range of differing opinions about the CFPB, we are united in our desire to see predatory lending practices ended. Scripture teaches us to respect the God-given dignity of every person. Targeting our economically vulnerable neighbors for financial exploitation simply because they are poor is sinful.
In review of the rule proposal issued, it is clear that the draft rule seeks to protect vulnerable individuals and families in time of financial crisis from debt traps designed around their inability--as opposed to ability--to repay their loan. Requiring a lender to make a determination of a borrower’s ability to repay is a longstanding principle of the U.S. banking system. A strong rule must not only have strong upfront underwriting requirements, but effective back-end protections against repeated flipping of the loans as well. We believe that these efforts are a step in the right direction, but more must be done.
We are deeply concerned that as proposed, the rule puts forward an exception from the borrower's ability to repay standard which allows for six 300% interest payday loans in a year. This sanctioning of usurious loans not only contradicts our own faith traditions, but also contradicts the CFPB’s own reasoning laid out in its proposal. The CFPB recognizes in its proposal the harmful consequences of unaffordable loans, such as defaulting on expenses or having to quickly re-borrow. By the CFPB’s own reasoning, allowing six loans in a year in rapid succession, as exceptions to the assessment of a borrower's ability to repay, is too many. The CFPB must strengthen its proposal to not allow this exception from its ability to repay test for any more than one short-term loan in a year, and certainly must not let stand this free pass for six usurious loans in a year.