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US: Keep Strong Controls on Payday Lending

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This ACE Cash Express outlet on San Mateo Boulevard in Albuquerque, New Mexico sits on a block with several small loan storefronts. The lenders who advance people money on their paychecks charge exorbitant interest rates that often snare the most vulnerable customers in a cycle of debt.


© 2015 Vik Jolly/AP Photo

(Washington, DC) – The Consumer Financial Protection Bureau should not rescind any part of the national rule governing payday, vehicle title, and certain high-cost installment loans, Human Rights Watch said yesterday in a letter to Kathy Kraninger, the agency’s director. In February 2019, the agency proposed to roll back parts of the rule governing short-term, high-interest loans finalized in 2017, particularly requirements on lenders to ensure that borrowers have the ability to repay loans before issuing them.

Payday and other types of short-term and small-dollar loans often carry exorbitant interest rates. This can make repayment difficult for borrowers, many of whom live paycheck to paycheck. Borrowers who cannot afford to repay a loan in full may fall into a “debt trap,” needing to take out another loan with additional fees, creating a cycle of compounding costs and growing repayment periods.  People can lose their cars or other assets or sacrifice basic needs when this happens.

“Reasonable regulations that prevent predatory lending practices are essential to keep people out of crushing and inescapable debt,” said Arvind Ganesan, business and human rights director at Human Rights Watch. “The Consumer Financial Protection Bureau developed these regulations after rigorous, nationwide research and an in-depth consultation process and should put them into effect without delay to help protect the country’s most vulnerable people.”

In the letter, Human Rights Watch presented research on the negative impact of predatory payday loans on Native Americans living on reservations in South Dakota and New Mexico. In a survey of nearly 400 people, Human Rights Watch found that payday loans are difficult to repay for the majority of the borrowers who responded and cause problems for covering household expenses. About a third of the borrowers who responded reported serious consequences as a result of their payday loan, including threats of criminal charges by debt collectors, eviction, and loss of employment.

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