CU: CFPB Report Puts a Spotlight on Need for Payday Lending Reforms

WASHINGTON – The Consumer Financial Protection Bureau (CFPB) today released a report examining payday lending and the cycle of debt that traps too many borrowers. The consumer watchdog found that four out of five payday loans are rolled over or renewed within 14 days and the majority of all payday loans are made to borrowers who renew their loans so many times that they end up paying more in fees than the amount of money they originally borrowed.

Consumers Union, the policy and advocacy division of Consumer Reports, commended the CFPB for calling attention to the troubling industry that leaves consumers owing lenders more than they bargained for. Consumers Union will testify at the CFPB’s Payday Field Hearing in Nashville today.

“The CFPB has put payday lending under the microscope and the troubling findings highlight the need for swift action to protect consumers. Too many consumers who turn to payday lenders find themselves trapped in loans that are easy to obtain but difficult to repay,” said Pamela Banks, senior policy counsel for Consumers Union, who is testifying at the CFPB’s Payday Field Hearing today. “The biggest challenge for consumers going forward is finding a short-term loan that is safe, transparent and affordable, with lending based on the consumer’s ability to pay rather than the lender’s ability to collect. We urge the CFPB to limit the excessive fees affiliated with these sketchy loans, extend payment schedules to a few months rather than weeks, and consider caps on the number of payday loans a customer can obtain in a year.”

To read the CFPB's full report, visit www.CFPB.gov.

Media Contacts:
David Butler, Consumers Union, 202.462.6262 or dbutler@consumer.org
Kara Kelber, Consumers Union, 202.462.6262 or kkelber@consumer.org

About Consumer Reports

Consumer Reports is a nonprofit membership organization that works side by side with consumers to create a fairer, safer, and healthier world. For 80 years, CR has provided evidence-based product testing and ratings, rigorous research, hard-hitting investigative journalism, public education, and steadfast policy action on behalf of consumers’ interests. Unconstrained by advertising or other commercial influences, CR has exposed landmark public health and safety issues and strives to be a catalyst for pro-consumer changes in the marketplace. From championing responsible auto safety standards, to winning food and water protections, to enhancing healthcare quality, to fighting back against predatory lenders in the financial markets, Consumer Reports has always been on the front lines, raising the voices of consumers.

© 2014 Consumer Reports. The material above is intended for legitimate news entities only; it may not be used for advertising or promotional purposes. Consumer Reports® is an expert, independent, nonprofit organization whose mission is to work side by side with consumers to create a fairer, safer, and healthier world. We accept no advertising and pay for all the products we test. We are not beholden to any commercial interest. Our income is derived from the sale of Consumer Reports® magazine, ConsumerReports.org® and our other publications and information products, services, fees, and noncommercial contributions and grants. Our Ratings and reports are intended solely for the use of our readers. Neither the Ratings nor the reports may be used in advertising or for any other commercial purpose without our prior written permission. Consumer Reports will take all steps open to it to prevent unauthorized commercial use of its content and trademarks.