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CFPB to Closely Examine Small Credits, Payday Lenders

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An advisory council warned the Consumer Financial Protection Bureau that borrowers are still at risk from small-dollar loans with high fees and roll-over debt.

In a meeting on Wednesday of the CFPB's group of finance and consumer experts, several board members suggested that the agency needs to do more when examining small credits and payday lenders.

The CFPB, created by the Dodd-Frank reform law, is interested in short-term credit companies, specifically payday lenders, in which debt rolls over repeatedly. When this happens, it generates high fees in what the agency's Directory Richard Cordray calls "a debt trap."

"In opening remarks before the council, Cordray said the agency is focusing on four red flags: deceptive practices, debt traps, structural roadblocks such as inaccurate credit reporting and discrimination," writes American Banker's Rachel Witkowski.

"As we continue to build up the capacity of this new agency, those efforts will continue unabated over the coming year," said Cordray "But it is also important for us to reflect on what we find to be the more fundamental problems and challenges endemic to consumer financial markets, so that we can understand and address them more effectively."

For the full piece see "CFPB Pressed to Set Limits on Small-Credit Lenders" (may require subscription).

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An advisory council made up at bankers asking the CFPB to focus on the 5 billion dollar payday loan industry? Of course no mention of the bank's small loan (over draft loan) programs that charge rates in the 1000% + on amounts as low at a $1 and due as soon a the payroll deposit hits. Total revenue from bank overdraft fees grew from $30.8 billion in June 2011 to $31.5 billion in June 2012, a whopping $700 million increase yet this council advises that the CFPB look at payday loans!
Posted by Bank Reform | Monday, February 25 2013 at 10:58AM ET
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