Here is a sampling of reaction to the proposed rule on payday pending issued yesterday by the Consumer Financial Protection Bureau.
EDITORIAL: A Lame Response to Predatory Loans (The New York Times)
The Consumer Financial Protection Bureau has been promising for more than a year to rein in the payday lending industry, whose business model relies on luring Americans into ruinously priced loans that can carry interest rates exceeding 400 percent. The proposal that the agency unveiled Thursday represents a down payment on that promise. But the final rule — expected next year — will need stronger, more explicit consumer protections for the new regulatory system to be effective. …
The best solution would be for Congress to give the public the same protection from predatory lending that members of the military received under the Military Lending Act of 2007. The rules created under that law made it illegal for lenders to charge more than 36 percent for payday loans, vehicle title loans, installment loans and other forms of credit. (That rate is still quite high.)
The Consumer Financial Protection Bureau proposed new regulations on Thursday that could help rein in predatory payday loans, short-term lendings that come with high interest rates that often exceed 300 percent.
Consumer protection groups, however, warn that they may not do enough.
Payday lenders disproportionately target poor Americans who need money fast to pay for costs like late bills. The average payday loan is $375, yet it takes five months and $520 in fees to pay off, frequently trapping borrowers in predatory debt spirals.
Federal regulators Thursday unveiled rules that could mean a death sentence for the payday-lending industry, a cause that has already sparked infighting between mainstream Democrats like Debbie Wasserman Schultz and the party’s Elizabeth Warren wing. …
The debate has spawned bipartisan legislation backed by Wasserman Schultz to delay the new rules for two years, a move that she says would give states time to adopt stricter laws. That stance has drawn attack ads by opponents of the industry.
Payday-Lending Curbs: Thumbs Down From Banks, Thumbs Up From Fintech (Wall Street Journal)
In unveiling new rules Thursday to shake up the payday-lending market, federal regulators said they wanted to curb what they consider abusive practices, while encouraging new lenders to enter the market and maintain credit for hard-up, low-income borrowers.
But many conventional lenders—credit unions and community banks—said the new rules were too onerous to encourage them to try to expand in a market that many have abandoned to smaller storefront and online lenders.
Prominent online lenders, on the other hand, said they could step up their business in the small-dollar credit market under the new regulations, seeing opportunity for the rapidly growing sector to expand even further.