WASHINGTON, D.C. – In response to the Consumer Financial Protection Bureau’s release of a first look of its efforts to address payday lending, U.S. Sen. Sherrod Brown – Ranking Democrat of the Senate Committee on Banking, Housing, and Urban Affairs – issued the following statement:
“Too many Americans are trapped with a lifetime of debt after taking out payday loans. And for too long, the payday lending industry has evaded rules that would protect consumers. Until Congress created the CFPB a few years ago, there was no federal agency responsible for supervising lenders and enforcing regulations in the payday loan market.
“The CFPB has undertaken a thorough and careful study of the market before proposing this rule, and has exposed previously unknown information about the market, including that 80 percent of payday loans are followed by another loan within 14 days.
“Today’s proposal by the CFPB is an important first step to ensuring that payday lenders operate with clear rules of the road, strong federal oversight, and meaningful consumer protections. But the proposal must be strengthened to close loopholes that would continue to allow dangerous loans that trap consumers in a lifetime of debt.”
More than 12 million Americans use payday loans each year. In the United States, the number of payday lending stores exceeds the combined number outnumber the amount of McDonalds or Starbucks franchises.
In June 2014, Brown sent a letter to the Consumer Financial Protection Bureau (CFPB) calling for more robust consumer protections to ensure hardworking Ohio families don’t fall prey to predatory loans that keep consumers trapped in a cycle of debt. In his letter, Brown pointed to a Center for Financial Services Innovation report that found that alternative financial products – including payday loans – generated nearly $89 billion in fees and interest in 2012. Brown called on the CFPB to address the full range of products offered to consumers – specifically looking at the practices of loan companies offering auto title loans, online payday loans, and installment loans. With regulation of the payday industry traditionally falling to states, Brown called on the CFPB to use its authority to implement rules that fill gaps created by inadequate state laws.