CFPB National Payday Lending Rule Has Potential Pitfalls for New Jersey

NJCA:  CFPB Rule Needs Work, Poses Problems for States with Stronger Laws

New Jersey Citizen Action (NJCA) hails the Consumer Financial Protection Bureau (CFPB) issuing a proposed national rule, which attempts to eliminate abusive payday and car title lending.  NJCA, however, urges the Bureau to issue a final rule without loophole. The proposed rule does not require an ability-to-repay assessment for all payday loans, which could undermine the strong state usury and other consumer protection laws in place in New Jersey. It also fails to provide explicit reinforcement of state debt trap prohibitions and bans.

“New Jersey has a perfectly good law in place that imposes a flat 30% usury cap and should protect consumers from debt trap loans that average 400% APR,” said Beverly Brown Ruggia, Community Reinvestment Organizer for NJCA. “The CFPB rule does address key dangers inherent in predatory payday and auto title loans, but the rule is not as comprehensive as it should be and could appear to sanction the industry enough to undermine existing state protections.”

“New Jersey, New York, Pennsylvania, 11 other states and the District of Columbia effectively ban predatory, high-cost payday loans, and we’re clearly all better off without them. The CFPB’s proposed rule takes some very important steps toward protecting consumers from these high-interest debt traps. It needs to be stronger, however, to prevent payday lenders from making any loans without assessing whether the borrower has the ability to repay and from marketing them to our states online”

“The rule is a good start, but we urge the CFPB to employ its fullest powers to issue a final rule that requires an ability-to-repay assessment across the board. We urge the Bureau to declare any violation of our state’s usury and other consumer protection laws an unfair, deceptive, and abusive act or practice. New Jersey needs a final rule that bolsters and does not undermine our toughest existing state laws or provide safe havens anywhere else,” concluded Brown Ruggia.