A New York Times editorial today addresses the proposal by the Consumer Financial protection Bureau to gut the Bureau's own rule protecting low-income borrowers from predatory practices of payday lenders. As the NYT put it, "The federal Consumer Financial Protection Bureau betrayed financially vulnerable Americans last week by proposing to gut rules conceived during the Obama era that shield borrowers from predatory loans carrying interest rates of 400 percent or more."
The editorial explains that "voluminous data collected by the consumer protection bureau showed that the industry’s business model — in which a $500 loan could cost a borrower $75 or more in interest just two weeks later — was built on the presumption that customers would be unable to pay at the appointed time and would be forced to run up the tab by borrowing again."
The editorial suggests that the CFPB's "s abdication of its mandate to protect consumers underscores the need for state usury laws, which have passed in 16 states and offer the surest path to curtailing debt-trap lending."
The full editorial is here. The CFPB's proposed rule is here.
