By Kathryn Hazelett<\/p>\n\n\n\n
Back in 2004, Southern was a part of a group called Arkansans\nAgainst Abusive Payday Lenders (AAAPL), whose sole purpose was to remove payday\nlenders from Arkansas. It took another five years, many hours in court, and\nstrong advocates in both the private and public sectors, but the last\nstorefront payday lender left Arkansas in 2009<\/a>. It was\none of the rare victories for consumers that still makes a difference today. <\/p>\n\n\n\n While Arkansans enjoy protections from predatory lenders,\nresidents in Mississippi and many other states aren\u2019t so lucky. Now the payday\nlending industry has successfully lobbied the agency responsible for regulating\nthem to reconsider federal rules designed to reduce financial harm to\nborrowers. But it\u2019s not too late to make your voice heard and let the government\nknow<\/a> that borrowers need real protections in place against unscrupulous\npayday lenders. <\/p>\n\n\n\n Payday loans are debt traps. They work by offering a borrower a\nshort-term loan to be paid back on the borrower\u2019s next payday. The borrower\nwill often leave a check with the payday lender for the full amount of the loan\n(plus interest) to be deposited on that next payday, but that\u2019s usually not\nwhat happens. Rather, the borrower returns and is only able to afford to pay a\npart of the loan (usually the interest), so the lender \u201crolls over\u201d the loan\nuntil the next payday and then the next and the next and the next. Borrowers\nbecome trapped in a cycle of debt \u2013 just paying the interest on these \u201cloans\u201d\nat an annual percentage rate (APR) of 391%<\/a>, and\nthese interest fees add up.<\/p>\n\n\n\n Unlike Arkansas, in most states, these usurious \u201cloans\u201d still\nhappen every day. According to the Center for Responsible Lending, borrowers in\nMississippi see an average APR of 521% for payday (and car title) \u201cloans\u201d with\ntotal costs to borrowers of $229,196,714<\/strong>\nannually.<\/p>\n\n\n\n And, these\nloans are taken out by real folks, like Jennifer Williams<\/a>, with real short-term financial needs who then end up stuck in a\ncycle of debt. In 2006, Jennifer had just started a\nteaching job in Cleveland, MS. She was $100 short on her bills one month,\ndidn\u2019t have a good relationship with traditional banks, and ended up at a check\ncasher (one of 18 in a one-mile stretch of highway in her community). <\/p>\n\n\n\n \u201c\u2019I\noriginally borrowed $400. I had to pay an $87-a-month fee to pay it back,\u201d\nWilliams said. Three years later, she owed nearly\n$5,000 to nine different payday lenders<\/a>, at nine different\nlocations, and was totally overwhelmed.<\/p>\n\n\n\n She\nfound Southern and its financial education programming and now has a positive\nfinancial future, but not everyone is as fortunate. There\u2019s a way to help them,\ntoo. <\/p>\n\n\n\n In\n2017, The Consumer Financial Protection Bureau (CFPB) finalized a rule to\nestablish ability-to-repay requirements for payday and vehicle title loans,\nreferred to as the \u201cAbility-to-Repay\u201d rule. This rule requires<\/a>\nthat \u201clenders [to] conduct a \u2018full-payment test\u2019 to determine upfront that\nborrowers can afford to repay their loans without\nre-borrowing<\/em>\u201d (emphasis added). Preventing the churn of lending prevents\nthe debt trap from taking hold. Borrowers will actually be able to pay off\ntheir loans in a reasonable time without having it rolled over and over and\nover. <\/p>\n\n\n\n The\nrule is now under assault and the new CFPB leadership has called to rescind this\nnew rule. This change is not only unnecessary, it would be extremely\ndetrimental to those it was put in place to help. The rule was the result of\nmore than five years of\ncareful study<\/a> that produced \u201cmountains of evidence that the\npractice of making a payday or car title loan without a determination of the\nborrower\u2019s ability to repay is an \u201cunfair\u201d and \u201cabusive\u201d practice under the\nConsumer Financial Protection Act.\u201d<\/p>\n\n\n\nWhat are Payday Loans?<\/h2>\n\n\n\n
CFPB\nFinal Rule under Attack<\/h2>\n\n\n\n