For Immediate Release
Last week the Consumer Financial Protection Bureau (CFPB) proposed to reverse their own rule, issued in 2017, protecting consumers from the harms of predatory lending, despite the lack of new evidence that the rule needs to be reconsidered. Oklahoma Policy Institute opposes this proposed repeal and strongly urges the CFPB to allow the 2017 rule to take effect as scheduled later this year. Oklahomans are depending on these promised protections.
The 2017 rule simply required payday lenders to determine whether borrowers had the means to repay a loan before making the loan. That rule, meant as a way to protect borrowers from taking out extremely high-cost loans they are unable to afford, was the end result of five years of research, data collection, hearings, and nearly half a million public comments. It was based on sound research and evidence, and there is no new evidence to warrant its reconsideration now.
The 2017 rule and its protections were especially important for Oklahomans. In 2017 Oklahomans took out nearly 900,000 payday loans, incurring nearly $50 million in fees. The annual interest rate on these loans can exceed 450 percent. The average payday loan customer in Oklahoma takes out 6 payday loans per year, and Oklahoma leads the nation in the rate of payday borrowing. Far from being the source of occasional credit to meet an emergency, payday loans are used over and over by the most financially-strapped Oklahomans, trapping borrowers in a cycle of high-cost debt. Requiring lenders to check a customer’s ability to repay a loan while still meeting other necessary expenses would end the payday debt trap and bring much-needed relief to Oklahomans struggling to make ends meet.
Without federal action, Oklahoma lawmakers should join over a dozen other states that have put an end to predatory payday lending by capping interest rates at 36 percent APR and ending the practice of allowing borrowers to take out new loans to pay off existing loans that come due.