Civil Rights and Consumer Groups Condemn Regulatory “Emergency” Guidelines That Allow Banks To Provide Payday Loans


Washington, DC March 26, 2020Today under the guise of a national crisis, the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB) and the National Credit Union administration Issuing guidelines for lending for small dollars which lacks the consumer protection needed to ensure that credit does not keep borrowers trapped in a debt cycle. The guide does not warn of prohibitively high interest rates and says balloon payments may be reasonable – paving the way for loans with features of debt trap payday loans. Several civil rights and consumer groups strongly condemned this action.

“This crisis will last longer than two weeks, and balloon payday bank loans will only leave a hole in your next paycheck if a family’s financial situation only gets worse.” said Lauren Saunders National Consumer Law Center. “Banks shouldn’t revive their previous payday loans” make in 2013who the CFPB found Consumers trapped in debt. ”

The National Consumer Law Center, the Leadership Conference on Civil and Human Rights, NAACP, Center for Responsible Lending, Americans for Financial Reform, and Consumer Federation of America have made the following statements:

Where to borrow money?

“This is the worst possible time for banks to make predatory payday loans. State regulators have opened the door to banks to exploit, rather than help, people.

“Essential consumer protection measures are missing in these instructions. By not saying anything about the harm done by high-yielding loans, regulators allow banks to charge exorbitant prices when the needy can least afford them. They have also added credibility to structured credit balances with one-time payment that have been shown to keep people trapped in a cycle of repetitive recovery and debt shredding.

What are the offers of the banks?

“Banks shouldn’t get infected with this terrible idea. Especially at a time when banks receive 0% interest loans from the federal government, bank loans should be fair and affordable – at an annual interest rate of a maximum of 36% for small loans and lower for larger loans. We will watch to see if banks offer helping or hurting loans.

Around the time of the last recession, a handful of banks were issuing “deposit advances,” giving borrowers an average of 19 loans per year at over 200% annual interest. These bank payday loans have disproportionately damaged the financially vulnerable banks and badly damaged the banks’ reputations. Since 2013, when regulatory guidelines warned against this form of credit, the banks have mostly stayed away. We trust that they will continue to do so as they do not want to repeat past mistakes. “The non-profit National Center for Consumer Law® (NCLC®) advocates economic justice for low-income and other disadvantaged people in the United States through policy analysis and advocacy, publications, litigation, and training.

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