Small business advisory review panel for potential rulemakings for payday, vehicle, title, and similar loans

Drawing on its research, market monitoring, supervisory, and enforcement experience, the Consumer Financial Protection Bureau (Bureau) has serious concerns that lender practices in the markets for payday, vehicle title, and similar loans are causing substantial harm to consumers. Chief among these concerns is that lenders structure loans with payments that are often beyond a consumer’s ability to repay, forcing the consumer to choose between default and repeated reborrowing—which, as used in this Outline of the Proposals Under Consideration and Alternatives Considered (Outline), includes reborrowing, rolling over, renewing, or refinancing a loan. Lenders typically do not determine whether a consumer can afford to repay a particular loan while meeting her other major financial obligations and her living expenses. The Bureau is concerned that too often in these markets lenders can create the conditions to succeed even where the consumer fails, upending notions of traditional lending based on mutual risk and aligned incentives. This failure to determine whether consumers can afford their loans creates risk of consumer harm because these lenders are extending what is often very expensive credit to consumers who may be experiencing significant financial difficulties.