WASHINGTON (2/21/13)--Consumer Advisory Board (CAB) members on Wednesday called on the Consumer Financial Protection Bureau to create and implement tighter regulations for payday lenders and short-term small-dollar credit products.
In remarks delivered before the first CAB meeting of 2013, CFPB Director Richard Cordray identified short-term loans as one of four "classes of problems" that his agency will focus on going forward.
The Credit Union National Association has also urged the bureau to focus more attention in 2013 on regulating entities in the financial marketplace that engage in abusive practices, such as payday lenders, that have been unregulated or under-regulated to date.
To address existing short-term loan issues, CAB members suggested the CFPB could:
- Require longer repayment periods for payday loans;
- Limit the number of times a borrower may roll over a payday loan; and
- Force lenders to verify that a borrower can repay a given loan before it is taken out.
Debt traps such as short-term loans "can cause consumers to veer off the pathway to opportunity," Cordray noted. "There is an obvious demand for short-term credit products, which can be helpful for consumers who use them responsibly and which are structured to facilitate repayment. We want to make sure that consumers can get the credit they need without jeopardizing or undermining their finances. Debt traps should not be part of their financial futures," he added.
Credit unions and CUNA are committed to providing safe and affordable alternatives to predatory payday lenders, and credit unions across the country have implemented various programs in order to provide individuals in their communities an alternative to high-priced payday lenders.
CUNA supports the ability of credit unions to provide beneficial short-term, small-dollar loans as alternatives to predatory payday lending, which have "no place in the financial marketplace." CUNA has also urged the bureau to focus more attention in 2013 on regulating entities in the financial marketplace that engage in abusive practices, such as payday lenders, that have been unregulated or under-regulated to date.
Wednesday's CAB session was the first day of a two-day board meeting.
During today's meeting, the board is scheduled to discuss:
- CAB governance;
- Remittance policies;
- Overdraft fee issues;
- Mobile payments; and
- Credit reporting and debt collection.
Two credit union representatives are among the 25 CAB members. Bill Bynum, CEO of Hope Enterprise Corp. and Hope Community CU, Jackson, Miss., serves as vice chair of the CAB. Laura Castro de Cortes, vice president of alternative financial services for Centris FCU, Omaha, Neb., is a CAB member.
The board advises CFPB leadership on consumer financial issues and emerging market trends.
For Cordray's remarks and more on this week's CAB meetings, use the resource links.