A Connecticut advocacy group is calling for better federal regulation of predatory lending, to help states crack down on the worst practices. ConnPIRG just released its latest analysis of data from the Consumer Financial Protection Bureau.
The report shows almost 10,000 complaints have been submitted in less than three years about companies that offer payday loans, auto title loans or installment loans. More than half the complaints were submitted about just 15 companies.
ConnPIRG regularly looks at data from the CFPB, but this study marks the first time the group was able to read written explanations from consumers about the issues they experienced.
More than 90 percent of those narratives involved the unaffordability of loans, including issues like abusive debt collection practices, bank account closures, long-term cycles of debt, and bank penalties because of collection attempts.
Connecticut’s banking department has strict laws about things like high interest rates and the disclosure of fees and terms, but Evan Preston of ConnPIRG told WNPR that companies are now beginning to get around state laws.
"The internet has made it more and more challenging to have those laws take their full effect," he said. "Because out of state lenders who are selling loans online, can often skirt around enforcement of those rules, and it makes it tremendously difficult for states with good, strong consumer protections to enforce those."
The Consumer Financial Protection Bureau is proposing new federal rules for lending companies. The regulations would require, for the first time, that lenders determine whether customers can afford to repay loans with enough money left over to cover normal expenses without re-borrowing.
But ConnPIRG said that even this plan has a loophole.
"That loophole would allow for up to six loans from these debt trap institutions to be made to people," said Preston. "One of those predatory loans can set off a chain of events that can ruin someone's life. The line should be zero."
The public can comment on the CFPB's new regulations until October 7.
