Washington D.C., Feb 19, 2019 / 16:43 pm
The Consumer Financial Protection Bureau on Feb. 14 officially proposed to rescind a rule to protect borrowers from predatory lending, prompting concern from Christian groups nationwide that the CFPB may weaken existing protections against loan sharks.
Catholic Charities USA and the United States Conference of Catholic Bishops joined a coalition of Christian groups to sign a letter last week expressing concern that rescinding the so-called "small dollar lending rule" could harm low-income borrowers.
"We encourage you to take this opportunity to strengthen, not weaken, the rule," the letter reads, penned by the group Faith for Just Lending.
"The rule as finalized seeks to protect vulnerable individuals and families in time of financial crisis from debt traps designed around their inability--as opposed to ability--to repay their loan...We believe that the rule was a step in the right direction, but more must be done."
The "small dollar lending" rule, which the financial agency announced in Oct. 2017, was designed to protect financially vulnerable consumers from annual interest rates of up to 300 percent on so-called payday loans and auto title loans. The bureau announced Feb. 6 that it seeks to delay the rule's implementation until 2020 and remove key requirements on lenders.
Though an estimated 12 million customers use small-dollar loans each year, the agency has long chronicled the risks these loans pose to the vulnerable. Faced with having to repay a loan along with high interest and fees, borrowers risk "defaulting, re-borrowing, or skipping other financial obligations like rent or basic living expenses such as buying food or obtaining medical care," according to the CFPB.