Key Takeaway

Programmatic experience has shown Coalition members the devastating impacts predatory lending can have on residents.

The 15-member CFE Coalition has weighed in on key federal policy issues since its founding in 2008.

In this 2016 letter, the Coalition highlights how programmatic experience has shown members the devastating impacts that predatory lending can have on residents. The Coalition applauds the Bureau’s efforts to create strong national regulations to safeguard consumers from abusive and costly practices in the short-term lending market that trap them in cycles of debt, and offers a number of recommendations. These include: the proposed full payment test should include standardized, transparent methods for estimating basic living expenses; access to covered short-term loans should be limited to four per 12 month period under the alternative requirements; the CFPB should implement a reasonable maximum payment-to-income ratio as an alternative to the full payment test to enable financial institutions to offer lower-cost, sustainable installment loans; lenders should be required to meet a clearly defined maximum annual portfolio default rate on all covered loan sequences, regardless of whether they use the full payment test or approved alternatives; and lenders should be required to contribute a percentage of revenue from all covered loans to a fund that supports nonprofit financial counseling.

Additional Takeaways

The CFPB should develop standardized estimation methods for estimating ability to repay.

The CFPB should limit the total number of short-term loans to four per 12 month period to further limit the potential damage of these loans.

Lenders should be required to contribute a percentage of loan revenue to a fund supporting nonprofit financial counseling.

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