Caucus chairs issue call for stronger payday lending rules

The chairs of the congressional progressive, Hispanic and Black caucuses are urging financial regulators to crack down on payday loans.

In a joint letter to Consumer Financial Protection Bureau Director Richard Cordray, Congressional Progressive Caucus Co-Chairs Keith Ellison (D-Minn.) and Raúl Grijalva (D-Ariz.), Hispanic Caucus Chair Linda Sánchez (D-Calif.) and Black Caucus Chair G.K. ButterfieldGeorge (G.K.) Kenneth ButterfieldThe Hill's Morning Report — Trump's new controversy Two former Congressional Black Caucus chairmen back Biden House Democrats blur lines on support for impeachment MORE (D-N.C.) called for strong rules to stem predatory practices that are based on exorbitant interest rates and high fees.

“According to a four state study conducted by Howard University’s Center of Race and Wealth, 12 million people living in low-income communities use payday loans annually,” the letter said. “Those individuals averaged eight payday loans each year with an average interest rate of 400 percent for each loan.”

A typical credit card carries anywhere from 15 to 18 percent interest.

CFPB has listed new regulations for short-term lenders a top priority and the rules are expected to be unveiled as soon as this month. Though the agency has not revealed the scope of the proposal, observers say it is likely to target short-term loans, including those requiring a borrower’s car title as collateral.

The caucus chairs are asking CFPB to reform the marketplace by implementing rules governing both storefront and online payday lending. They recommended the bureau require lenders to determine a borrower’s ability to repay a loan by considering both income and expenses and prohibit lenders from using post-dated checks that let them access a borrower's checking account as evidence of the ability to repay a loan.

The chairs also asked for limits on how long a borrower can remain indebted on short-term loans and for CFPB to refuse to include any exemptions for certain repeat loans in its rule-making.