Virginia Organizing and Virginia Poverty Law Center, organizations that have been working to stop predatory lending practices in Virginia for many years, released a Virginia predatory lending report showing the negative effect of high interest, short-term loans. Leaders of the organizations also reacted to the Consumer Financial Protection Bureau’s (CFPB) new proposed rules announced in Kansas City earlier that day.
“This report shows that predatory lenders are still gouging consumers in Virginia. Today, we are glad that the Consumer Financial Protection Bureau is taking some bold steps to regulate some of the worst practices in the industry,” said Virginia Organizing Chairperson Ladelle McWhorter. “Even with these changes, Virginia Organizing is still committed to continuing to call on our state elected officials to regulate this oppressive industry.”
“The proposed rules are a great start, but we are concerned about predatory lenders exploiting loopholes,” said McWhorter. “Our organizations plan to mobilize individuals to share their stories and contact the CFPB to talk about the need to close loopholes and implement strong consumer protections.”
Dana Wiggins, the Director of Financial Advocacy for the Virginia Poverty Law Center, believes that affordability is the most important factor for financial planning for the families she works with.
“For the many borrowers I speak to on a weekly basis, predatory loans are simply unaffordable, setting them further behind financially, instead of helping them regain financial footing,” said Wiggins. “The proposed rules by the CFPB have the potential to help consumers, but the key is ensuring that a borrower’s income and basic expenses such as housing costs and other major obligations, such as car bills or medical expenses are accounted for when determining affordability. Many borrowers have trouble in the loans because they tend to create cycles of debt. Affordability on the outset of a high-cost loan helps reduce the cycle affect, and reduce the predatory effects of many current loan products.”
Virginia Organizing Board member Debra Grant has experienced firsthand the trap of debt from predatory lenders.
“I was caught in a cycle of debt with payday loans, so I know how bad these lenders can be,” said Debra Grant of Virginia Beach. “If I look around my neighborhood, there are no major grocery stores, but many payday or title loan shops that are easily accessible. I’m glad the Consumer Financial Protection Bureau is taking action to stop these debt traps and I hope they will close those loopholes and make it harder for predators to take advantage of people like me.”
For years, Virginians have been plagued by these predatory lenders that set up shop in low-income communities and entice people striving just to make ends meet with ‘easy’ money. Virginia Organizing and Virginia Poverty Law Center have been working to hold these lenders accountable for marketing and selling products that trap individuals in a cycle of debt.
While the CFPB proposed rules do create such an affordability standard, the proposed rules also allow for too many exemptions and leaves open too many loopholes for that standard to meaningfully reduce the harm of predatory lending. A more detailed analysis of what works and what doesn’t about the CFPB’s proposal is available here: bit.ly/25CNL0H
The CFPB will be seeking comments from the public until September 14, 2016, after which they will review before making the rules final in 2017. In the meantime, consumers are encouraged to comment and suggest changes to the final rules that will close loopholes and remove exemptions. Comments can be offered at stoppaydaypredators.org/virginiaorganizing/.