San Francisco, CA– June 2, 2016– Today, the Consumer Financial Protection Bureau unveiled a proposal for a
new federal rule on payday and car title lending that has the potential to protect consumers from prolonged
cycles of debt, and save California residents millions of dollars if changes are made before the rule is finalized,
explained Liana Molina from the California Reinvestment Coalition.
“The Consumer Financial Protection Bureau’s proposed rule on payday and car title lending is a step in the right
direction, but there is still much work to be done to ensure this rule truly protects consumers from the legalized
loan sharks who prey on our communities,” Molina said. “Fortunately, we have the opportunity to provide
feedback on the proposal before it goes into effect. California Reinvestment Coalition members and allies will
be weighing in over the next 90 days to highlight the importance of closing loopholes in what is otherwise a
well-thought out proposal. In doing so, the CFPB can stop the debt trap once and for all.”
Payday and car title loans with interest rates that average more than 460 annualized percent drain over $745
million in fees annually from the pockets of Californians who can least afford it, according to a report by the
Center for Responsible Lending. Overall, the industry is estimated to create a $135 million net drain on
California’s economy, subtracting an estimated 1,975 jobs every year.
While they’re advertised as a way to meet short-term financial emergencies, the reality is that the loans are
anything but “short-term.” Instead, the majority of borrowers will have to roll over or renew their loans, leading
to multiple fees that quickly add up to far more than the amount borrowed. Instead of helping borrowers, most
will find themselves in a worse financial situation. For car title borrowers, 1 out of 5 will have their cars
repossessed as a result of using a car title loan. In California, over 17,000 borrowers have their cars repossessed
every year by car title lenders.
The California Reinvestment Coalition has been pushing for a rule that simply requires these lenders to do what
any responsible lender does already – to determine whether a borrower is likely to be able to pay back the loan,
without defaulting on basic necessities like rent and groceries, and without immediately taking out another
While the CFPB rule does create such an affordability standard, the rule also allows 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.
The CFPB’s public comment period is open until September 14, 2016, after which they will review before
making the rule final in 2017. In the meantime, consumers and community stakeholders are encouraged to
comment and suggest changes to the final rule that will close loopholes and remove exemptions.